• In the six months ended 30 June 2019, the TradePlus Shariah Gold Tracker registered a positive return of 9.62%. LBMA Gold Price AM also registered a return of 10.26%.
• Upside to gold prices may arise from the possibility of escalation of trade tensions, Brexit uncertainties, China economic slowdown and further monetary policies easing in major economies (especially in US).
• However, downside risks on gold prices may stem from a trade war resolution between US and China and a steady US Dollar

Performance of the Fund

In the TradePlus Shariah Gold Tracker’s half-yearly report for the six months financial period ended 30 June 2019, the TradePlus Shariah Gold Tracker (the Fund) registered a positive return of 9.62%, compared to the LBMA Gold Price AM (the Benchmark), which recorded a return of 10.26%. The Fund had underperformed the Benchmark by 0.64%, but a significant improvement and positive turnaround from the negative return of the Fund of -4.13% as at end June 2018. As at 30 June 2019, the Fund’s Net Asset Value (NAV) per unit was US$0.4613 compared to US$0.4208 as at December 2018. The Fund’s NAV was at US$12.501mn or RM51.642mn.

As stated in TradePlus Sharah Gold Tracker half-yearly report, cash flow during for the six months ended 30 June 2019 was US$33,566 compared to US$84,159 between 28 November 2017 to 30 June 2018 due to lower cash flows from financing activity led by higher payments for cancellation of units and lower proceeds from creation of units.

There was no income distribution or unit split declared for the financial year ended 30 June 2019. The Manager invested 99.94% of the fund’s NAV (invested in physical gold bars), while the balance of 0.06% was kept in cash. The number of units in circulation was 27,100,000. The management expense ratio was at 0.53%.

Performance of Gold in 2Q19

The higher return on both the Fund and the benchmark in 2Q19 was bolstered by the stronger performance of gold prices. In 2Q19, gold prices rose by 9.3% to US$1,413.7/oz, which was its highest level since 2013. In the first seven months of 2019, gold prices rose sharply by 11.3% to reach US$1,426.10/oz. Since our upgrade to our call from a “Hold” to a “Buy” on the TradePlus Shariah Gold Tracker in our report dated 12th February 2019, gold prices have surged by about 16.6% to US$1523/oz as of 31st August 2019. Part of the reasons for the rise in gold prices were due to its safehaven quality amid heightened risks namely the escalation of trade tensions between US and China. In addition, expectations of lower interest rates from monetary policies easing in major economies (such as the US) also caused gold prices to move higher during the quarter.

Furthermore, due to trade and geopolitical tensions as well as volatile global financial markets, according to World Gold Council, these factors caused central banks to demand for more gold as a safe haven, where central bank net purchases rose 47% yoy to 224.4 tonnes (76% to 149.8 tonnes). In 1H19, net purchases amounted to 374.1 tonnes, its highest level since becoming net buyers of gold in 2010.

Source: Affin Hwang Research - 6 Sept 2019