Thomas McMahon
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Updated 09 Oct 2024
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Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

Gold has had a great year, having broken through the $2,600 an ounce level in September. It had been hovering around the $2,000 an ounce level at the start of 2024. It is now at an all-time high. How you react to this news is arguably indicative of your psychological type. Does it make you want to go out and buy some (more) gold, or does it make you want to avoid it, selling whatever you own? We would expect most people to be more of the first persuasion, and inclined to jump on what is going up. It is a fairly basic human drive to seek security in numbers. If this is right, then value investors are weird psychological screw-ups, and arguably barely even human. Readers will have to judge for themselves whether that rings true.

Joking aside, it is genuinely difficult to put sentiment and emotions away when deciding how to handle assets that are on a tear. Perhaps this is why so few active managers have been overweight Nvidia? This has been a fundamentally wrong decision since at least January 2022, when Nvidia was trading at $15 a share. The price is $117 at the time of writing. If investing is about making money, then underweighting Nvidia after it had doubled and after it had quadrupled was wrong, wrong, wrong. Are investors also wrong to avoid gold after its 41% rise over the past 12 months?

While an ETF is the obvious solution for an investor looking for exposure to the gold price itself, it is also worth considering the mining sector. As we discuss below, the managers of Ruffer Investment Company (RICA) have sold their gold to buy the miners, arguing the cheap valuations mean there is more upside and less downside. Golden Prospect Precious Metals (GPM) remains the only option for pure-play exposure to the miners, and has soared by over 30% year-to-date in NAV terms. BlackRock World Mining (BRWM) does have significant gold mining exposure, although it remains focussed on industrial commodities, which have more economic sensitivity, in particular to the Chinese economy.

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