Gold-Miner ETF Jumps 30% in a Month, Beating Bullion Funds

Gold miners outshine bullion as ETF jumps more than 30% in a month

HANARO Global Gold Mining Companies gains 30.78% over one month

Rising gold prices magnify miners’ operating leverage

South Korea’s ETF market is rewriting the record books this year, with assets under management topping 500 trillion won in the first half. Leveraged ETFs tied to Samsung Electronics Co. and SK Hynix Inc., listed at the end of May, have drawn attention beyond the domestic market. Once viewed as supplementary investment tools, ETFs are now firmly established as core products. ETF Zoom In takes a closer look at the increasingly complex ETF market. [Editor’s note]

An exchange-traded fund that invests in global gold-mining companies has surged more than 30% over the past month, drawing attention from retail investors. The rally reflects expectations that a structural rise in gold prices will sharply improve miners’ margins.

Data from Koscom’s ETF Check showed that, as of Aug. 21, NH-Amundi Asset Management’s HANARO Global Gold Mining Companies returned 30.78% over the past month on a dividend-reinvestment basis, the highest among ETFs listed in South Korea.

The ETF invests in shares of global gold miners. As of Aug. 20, holdings with weights above 5% were Newmont Corp. at 12.53%, Agnico Eagle Mines Ltd. at 9.77%, Barrick Mining Corp. at 7.07%, Wheaton Precious Metals Corp. at 6.29% and AngloGold Ashanti Plc at 5.14%.

Newmont, the fund’s largest holding, is one of the world’s biggest gold miners. Founded in 1921, it has operated for more than a century and is an S&P 500 constituent.

Investing.com data showed Newmont shares rose 38.00% over the month through Aug. 20. That compares with a 1.76% gain in the S&P 500 over the same period. Other holdings with weights above 5% also posted strong gains, including Agnico Eagle Mines at 49.72%, Barrick Mining at 27.22%, Wheaton Precious Metals at 36.64% and AngloGold Ashanti at 46.68%.

HANARO Global Gold Mining Companies also comfortably outperformed ETFs tied to gold futures or spot gold over the past month. During that period, KODEX Gold Futures(H) and TIGER Gold Futures(H) rose 11.77% and 11.48%, respectively. ACE KRX Gold Spot and TIGER KRX Gold Spot gained 6.81% and 6.18%.

Gold miners stand out because a structural rise in gold prices can magnify operating leverage. Their cost structures are heavy on fixed expenses, so higher gold prices can rapidly widen margins. Yuanta Securities said all-in sustaining costs rose 16.2% in the first quarter from a year earlier, while gold prices climbed 49.4%.

Limited downside risk is also part of the investment case for gold miners. As of the first quarter, about 99% of global gold production sat in cost ranges below prevailing gold prices. That means most gold-mining companies can remain profitable even if gold prices pull back, limiting downside risk to margins.

With global gold-miner ETFs posting strong returns, brokerages are forecasting further gains in gold prices. Their view is that gold’s direction depends less on the level of interest rates than on what is pushing them higher.

Ko Kyung-bum, an analyst at Yuanta Securities, said gold prices have continued to rise even after the 30-year U.S. Treasury yield recently climbed above 5.3%. Rate increases driven by growth expectations tend to weigh on gold, while increases driven by fiscal concerns tend to lift it, he added.

Long-term yields have recently risen simultaneously in the U.S., Japan, Germany and France, suggesting the current move reflects a widening term premium tied to uncertainty over fiscal soundness. In that environment, interest rates are rising while the dollar is weakening.

The U.S. Treasury recently doubled the size of its long-term bond buybacks, Ko said, but the step has limits in addressing the fundamental drivers of higher long-term yields. As concerns over fiscal soundness persist, weaker confidence in the dollar will continue to support gold prices, he said.

Lee Su, Hankyung.com reporter 2su@hankyung.com