Interview: China Post Global sees golden ETF opportunity

Anyone with a gold fund has enjoyed healthy returns over recent months. Volatility, particularly following the UK’s Brexit vote, has driven some investors into getting exposure to the precious metal.

The gold price has risen 30% since the beginning of the year with some, including UBS, suggesting that we may be at the start of another gold bull run.

China Post Global, which purchased the exchange-traded funds (ETFs) range of Royal Bank of Scotland (RBS) this year, is pushing the Market Access NYSE Gold Bugs Index Ucits ETF.

The asset manager – whose parent China Post Fund has $18.8 billion (€17 billion) of assets under management and is based in mainland China – purchased the RBS ETF range in March, which had €360 million in assets at the time.

Danny Dolan, managing director of China Post Global (UK), said the ETF reflects near-term gold movements by tracking gold mining firms in the NYSE Gold Bugs Index, a modified equally weighted index made up of the largest gold mining companies that don’t hedge their gold production beyond a year and a half.

Dolan says: “This attribute offers investors the opportunity to participate in near-term gold movements. The NYSE Arca Gold Bugs Index is highly correlated with the spot price of gold and hence one of the most watched indices globally.”

Yet the gold mining sector has been in some disarray recently. For example, a merger of Barrick and Newmont in 2014, two of the largest miners, failed.

“There is a clear opportunity for the gold mining sector to grow significantly. Production costs are low, and demand for gold is strong. The gold price is likely to continue its upward trend as a result of global macro-economic uncertainty and low interest rates – meaning low opportunity cost of investing in gold,” Dolan tells Funds Europe.

Gold’s fortunes in many ways are linked to events in the general economy. The more dovish outlook from US policymakers reflects the current global macro-economic uncertainty and Dolan points out that investors turn to gold in times of uncertainty.

“As the possibility of subsequent Fed [Federal Reserve] rate hikes in 2016 has decreased significantly, interest in gold and gold mining companies is expected to remain strong,” he says.

Despite the emphasis on short-term gains from movements in the gold price, Dolan says the fund also attracts longer-term investors.

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