Despite peaking at US$2 039/oz in the first quarter and troughing at $1 629/oz in the fourth quarter, the gold price closed the year flat in US dollar terms at $1 814/oz. Over the year, however, the rand weakened 7% and therefore the rand gold price did the same.

A bullish environment prevails for gold in the medium term, as the global growth outlook is hampered by military conflict in Europe and ongoing Sino-American tensions. In the short term, China’s reopening will provide an offset to otherwise slowing global growth, but structural issues such as slowing population growth will create economic challenges in the medium term. Since OPEC Plus has demonstrated its intention to support the oil price around current levels, the risk of persistent inflation is growing.

The Old Mutual Gold Fund has a composite benchmark weighted 70% to South African gold equities and 30% to the FTSE Gold Mines Index, which is comprised of global gold stocks. JSE-listed gold shares performed as follows over the year: AngloGold Ashanti 3%, Gold Fields 5%, Harmony Gold -11%, Pan African Resources -9% and DRD Gold -2%. The FTSE Gold Mines Index returned -10% for the quarter in rands.

The fund is exposed to JSE-listed gold miners with globally diversified operating assets. Gold Fields is the fund’s largest holding. This share has rallied after the proposed acquisition of Yamana fell through, though as a knock-on effect the group is searching for a new CEO. The group has a global portfolio of low-cost assets and has brought costs under control at its South African South Deep operation. Production is expected to grow as it completes the Salares Norte project in Chile.

Given a more constructive outlook on the gold price, the fund holds no gold exchange traded funds (ETFs) in order to maximise leverage to the gold price.