2019 was characterised by global angst over the intensifying trade war between the US and China. An attack on Saudi crude production facilities, protracted Brexit negotiations and growing antagonism between the US and Iran have created an environment of amplified geopolitical uncertainty. It is no surprise that gold climbed 19% over the year, closing the fourth quarter at US$1 520 per ounce as investors sought safety. Given the recent strength of investment demand, a shortterm correction in the gold price is more likely.

The Old Mutual Gold Fund has a composite benchmark weighted 70% to the FTSE/JSE Gold Mining Index and 30% to the FTSE Gold Mines Index, which is comprised of global gold stocks. The FTSE/JSE Gold Mining Index gained 108% over the year while the FTSE Gold Mines Index rose 37% in rand terms.

The most marginal producers, Harmony Gold and Sibanye Stillwater, were the strongest performers on the local front this year, rising 103% and 258%, respectively. The fund has held relatively small positions in these stocks given concerns about the diversification of their portfolios. On the international front, the relative outperformer was Eldorado Gold.

AngloGold Ashanti remains the fund’s largest holding. The merger between Randgold and Barrick has left a void for a mid-sized gold company with a strong balance sheet and a strict capital allocation framework. AngloGold is on its way to filling this void. In the event of a gold price correction, the gold ETF will outperform stocks. Given the risk that the gold price has run too hard too fast, some funds have been allocated to the gold ETF.