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Gold's bull market is just beginning as European fund managers take a bigger stake - HANetf

Kitco News

Welcome to Kitco News' 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.

(Kitco News) - The gold market has started 2023 on solid footing and one European-based fund sees strong potential as investors take a renewed interest in the precious metal.

In November, analysts at HANetf surveyed 100 European and British wealth fund managers, and according to the results, 89% of respondents said that they intend to increase their exposure to gold in 2023.

According to the survey, wealth fund managers see central bank demand for gold as a major bullish factor for the precious metal. According to data from the World Gold Council, last year, as of the end of the third quarter, central banks bought 673 tonnes of gold, the most accumulated in a single year since 1967.

The survey shows that 83% of managers expect central banks to continue buying gold in the new year.

Along with central bank demand, wealth fund managers said that gold remains an attractive inflation hedge and a protection against further equity market volatility and risk.

When the survey was conducted, gold prices were trading near a two-year low and according to the survey, fund managers said those prices represented an attractive long-term entry point.

"It now may be the case that a lot of the negative sentiment towards gold has passed," said Tom Bailey, head of ETF research at HANetf, in the report. "Many analysts now see the Federal Reserve slowing rate hikes, while the dollar's strength now seems potentially in retreat. That should provide some relief for gold prices and potentially result in a pick-up in investment demand.

Last month Eric Strand, portfolio manager and creator of the European-listed AuAG ESG Gold Mining exchange-traded fund (LSE: ESGO), said that gold could be on the cusp of a new bull market.

With gold ending the week above $1,900, analysts turn their focus to $2,000

Strand said that he sees gold prices gaining 20% in 2023.

Along with gold, Strand expects the precious metal mining sector, which has underperformed compared to the commodity, will attract new momentum in the new year.

"Gold miners are today historically cheap relative to gold, something that will revert and overshoot in the coming secular bull market," he said. "Gold miners have a very low correlation with the broad stock market and are becoming more interesting for larger investors looking for possible/alternative return drivers and that may result in strong capital flows, which will then take equity prices higher."

Along with the AuAG ESG Gold Mining exchange-traded fund, HANetf also manages a second environmental and social governance (ESG)-focused fund: The Royal Mint Responsibly Sourced Physical Gold ETC (LSE: RMAU). Last year RMAU saw growth of 130%, bucking the global downtrend in the ETF market.

According to the survey, wealth managers see a potential premium for ESG-focused funds, with 36% of fund managers expecting a dramatic increase in transfers to gold funds with strong ESG credentials while 54% of respondents see a slight increase in switching.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.