SQX's Gold Mining Stocks Return Since Brexit
OREANDA-NEWS. Gold has retreated from its two-year high of US$1,366.33/oz reached in early July, and is now largely unchanged from the levels seen when Britain voted to exit the European Union on 24 June (Brexit), as global market volatility subsides. But while the price of bullion has averaged a total return of 24.0% in the year-to-date, it is still 16.0% lower than the five-year peak of US$1,627.05/oz set in July 2011.
The Federal Reserve will meet later this week – 26-27 July – to decide US monetary policy, and any comments on future direction of interest rates will likely have an impact on gold prices. As a general rule of thumb, gold price is negatively correlated to rising rates as the opportunity cost of holding non-yielding assets typically increases when interest rates climb. Gold prices are also sensitive to other variable factors, including geo-politics, the broader macroeconomic outlook and general consumption patterns.
SGX lists five gold mining stocks as categorised by the Global Industry Classification Standard (GICS®), of which the three largest have a combined market capitalisation of S$401.9 million. Investing in gold mining stocks is different from investing in physical gold or gold Exchange-Traded fund (ETFs). While gold stocks have a high correlation to physical gold, they are typically considered leveraged plays on the metal. In addition to gold prices, there are also many other factors (eg. corporate activity, currency, gold discovery, earnings power, operating efficiencies etc.) which will impact the price of gold stocks.
Singapore’s three largest gold mining stocks have averaged a total return of 29.3% since 24 June or Brexit, outperforming the SPDR® Gold Shares ETF’s total return of 1.2%, and the benchmark Straits Times Index’s (STI) total return of 7.1% over the same period. In the 2016 year-to-date, these three gold mining stocks have averaged a 54.3% total return, bringing their average one-year and three-year total returns to 52.4% and 9.7% respectively.
Wilton Resources Corporation Limited, an investment holding company, engages in the exploration, mining, and production of gold in Indonesia. It holds interest in the Ciemas Gold Project comprising two concession blocks covering a total area of 3,078.5 hectares located in Sukabumi Regency, West Java Province of Indonesia. The company is also involved in general trading, transportation, construction, real estate, logging, farming, plantation, forestry, electrical, mechanical, computer, workshop, and printing businesses. Wilton Resources Corporation Limited was incorporated in 2003 and is based in Singapore.
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