The Asia Miner

JUL-SEP 2019

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 16 • issue 3 28 FEATURE: Gold Meanwhile, Chinese demand fell 2 per cent y-o-y to 184.1t as the slowing economy and internaঞonal trade fricঞons affected consumer senঞment during the quarter. The smaller markets in the Asian region were a mixed bag in Q1. Performance ranged across the spectrum from weak (South Korea and Singapore), to stable/firm (Malaysia, Japan and Thailand) and strong (Vietnam and Indonesia). Weakness was most pronounced in South Korea where demand fell 19 per cent to 5.0t, the lowest Q1 since 2009. The market was undermined by its exposure to the global trade cycle and the US/China trade dispute. Total Q1 exports declined for the first ঞme in more than two years, with unemployment consequently rising to a nine-year high. The Q1 picture in Vietnam was contrasঞngly posiঞve: jewellery demand grew 6 per cent y-o-y to 5.4t, the strongest quarter for jewellery demand since Q1 2011. A healthy and sustained rate of economic growth has had a posiঞve income effect, supporঞng jewellery demand during the Vietnamese New Year (Tet holiday) – a tradiঞonal gold-buying occasion. GOLD-BACKED ETFS SAW A STRONG START TO THE YEAR, WITH 40.3T OF GLOBAL INFLOWS DURING Q1. In value terms, those inflows were equivalent to US$1.9bn. But flows during the quarter were not just one way – there were notable monthly variaঞons: chunky inflows in January (+71.4t) were parঞally offset by February oulows (-32.9t), while March was broadly neutral (+1.8t). Global AUM grew almost per cent during Q1, to reach 2,482.8t (US$103.4bn) by quarter-end. At a regional level, products listed in the US and Europe both had decent inflows – of 26.4t and 20t respecঞvely – while AUM in funds listed in Asia and other regions declined slightly (-6.1t). US-listed funds grew by 2 per cent during Q1. Investors added 26.4t to their holdings of North American-listed funds, equal to US$1.1bn of inflows. But investment flows were not consistent throughout the quarter. Strong January inflows (+53t) were supported by the US government shutdown, an escalaঞon in US/China tensions a[er the White House cancelled a planned trade discussion, and growing doubts over the health of the US economy. February saw much of those flows reversed as the more tacঞcal investors took profit on their holdings. Despite US stock markets generaঞng their strongest quarterly returns in ten years, investor senঞment in Q1 was underpinned by the shi[ing stance of the Federal Reserve, which adopted a more neutral monetary policy approach. The concurrent shi[ in market expectaঞons – from a predicted scenario of US rate rises to one in which rates stay unchanged over the remainder of this year – supported demand for gold-backed ETFs.6 And this more dovish outlook should underpin regional demand for the rest of 2019, although conঞnued strength in the stock market would be a headwind. AUM in European-listed ETFs remains near all-ঞme highs. As the euro gold price surged to an 18-month high in the early weeks of the year, investment flowed in to regional gold-backed ETFs (+20.1t). AUM in these products hit record levels, breaching 1,200t. Since the January influx, investment has been steady; marginal February oulows were fully reversed in March. Geopoliঞcs remains a key driver of investment in the region, with investors prizing gold's safe haven status amid the background of low/negaঞve yields, financial market volaঞlity and geopoliঞcal worries. The forthcoming European parliamentary elecঞons and the possibility that right-wing, populist parঞes will gain more of a foothold in the region, are a looming concern. As are Italy's burgeoning budget deficit and the ongoing Brexit saga. The la•er helps to explain why holdings in UK-listed funds remained near all-ঞme highs in Q1. Asian-listed funds lost 4.9t, much of which came from China. Conঞnued rotaঞon out of Bosera's funds meant a decline of 2.1t in the holdings of those two products. And the Huaan Yifu Gold fund lost 2.9t as investors fixed their a•enঞon on the rallying domesঞc stock market. BARS AND COINS Bar and coin demand totalled 257.8t in Q1 2019, down 1.4 per cent compared to the same period last year. This was largely due to a drop in Chinese demand and net disinvestment in Japan, which pushed global bar demand down 5 per cent y-o-y. Official coin demand, however, had its best start since 2014, rising 12 per cent y-o-y to reach 56.1t. Iran, Turkey, South Africa, the UK and US accounted for most of this growth. Historically, gold prices tend to spike largely as a response to geopolitical tensions and uncertainty, being perceived as a safe haven to ease the effects of global turmoil Bar and coin demand y-o-y tonnage change, top and boom 10. Image source: ©Metals Focus, World Gold Council

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