Exchange-traded funds (ETFs) investing in global gold mining companies rose even as international gold prices fell. This was because gold miners posted results that exceeded expectations, while also expanding shareholder returns.
According to KOSCOM ETF Check on Wednesday, the one-month return of the 'HANARO Global Gold Mining Companies' ETF (based on reinvestment of distributions) stood at 6.21% as of the previous day.
This contrasts with gold futures for December delivery on the New York Mercantile Exchange falling by 4.41% over the same period, and 'KODEX Gold Futures (H)' (-0.07%), 'ACE KRX Physical Gold' (-0.08%), and 'KODEX Gold ETN' (-0.17%) all posting negative returns.
The one-week return of HANARO Global Gold Mining Companies was 12.26%, the highest among gold-related ETFs. This is approximately 10 percentage points higher than the returns of KODEX Gold Futures (H) (2.52%), ACE KRX Physical Gold (2.1%), KODEX Gold ETN (2%), and 'TIGER KRX Physical Gold' (2.16%) over the same period.
HANARO Global Gold Mining Companies has delivered solid performance even as gold prices exhibit significant volatility amid concerns over U.S. base rate hikes. This is because, unlike other ETFs that track gold futures or spot prices, it invests in corporate stocks.
Gold mining company stocks can also see share prices decline when gold prices fall, given the nature of the industry. However, as corporations, they have the advantage of generating earnings and dividends, unlike gold itself.
The recent boost in HANARO Global Gold Mining Companies' returns was driven by the third-quarter results and shareholder return policies of gold mining companies.
The third-quarter results of major gold miners exceeded market expectations despite the correction in gold prices. Newmont, the world's largest gold miner, also delivered results that beat expectations.
Based on this, Newmont returned approximately $6.1 billion (approximately 814.04 trillion won) to shareholders through share buybacks and dividends for the first three quarters. This amount represents about 76% of its net income for the same period.
Barrick, a gold mining company, operates a policy of paying out 50% of its free cash flow (FCF) as dividends. Agnico Eagle is a dividend stock that has paid dividends annually for over 40 years since 1983, and it is strengthening shareholder returns by expanding share buybacks this year.
The financial investment industry expects gold price volatility to remain high in the future. This is because concerns over U.S. base rate hikes have grown after the U.S. Consumer Price Index (CPI) increase for October, released on the 10th (local time), came in at 0.4% month-on-month, exceeding market expectations of 0.3%.
Christopher Waller, a Federal Reserve (Fed) board member, stated that if core inflation rises by more than 0.3% before the CPI release, a December base rate hike should be considered. Since gold is an asset that yields no interest, its price typically falls when base rates rise.
However, experts analyze that there is a floor for gold prices as central banks around the world are buying gold and geopolitical risks are escalating.
Ha Gyun-hyung, a researcher at Shinhan Investment Corp, predicted, "The baseline path for gold next year will likely show a box range of $3,800 to $5,000," adding, "If real interest rates fall due to growth-slowing rate cuts, the upper limit could open up to $4,000 to $6,000."
Advice is also emerging that investors should not lose sight of gold from an asset allocation perspective.
An official at NH-Amundi Asset Management said, "It is necessary to allocate a portion of assets to gold-related assets in terms of their value as safe-haven assets and as a medium- to long-term inflation hedge."
The official added, "However, in a high-interest-rate environment like the recent one, the appeal of gold may diminish, so gold mining companies can serve as an alternative."
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