Precious Metals

About Project

Fund of precious metals will target the following structure of holdings.

Fund will acquire physical gold or shares of a relevant ETF whatever turns more efficient given acquisition, holding and disposal costs.

Gold

Сareful analysis of the dynamics of gold price points to the fact that, whenever the dominance of the major currencies of the world has been challenged, either by way of geopolitical events, such as wars, mayhem and political turmoil or by the devaluing effects of inflation and balance of payment problems, we have seen a resurgence in the role of gold. 

Significant influences on real gold prices come primarily from historical events that either reinforce or challenge the economic dominance of the US and the role of the dollar in the global monetary system. We had witnessed one instance of gold prices rising sharply in 2011 during the debt-ceiling crisis in the US when gold skyrocketed to an all-time high of $1,917.90 an ounce on August 22. The current US-China trade war, Brexit, Hong-Kong protests, Iran sanctions and the occupation of Crimea by Russia are all contributing to the risk of global turmoil resulting in the economic downturn that may fuel the rising demand for gold worldwide. Another long term source of gold demand is discontent with US policies: both Russia and China are stocking up on gold (China has not been buying gold since late 2016 until late 2018, but added almost 100 tons to its reserves since it resumed purchases in December 2018).

In terms of consumer and financial markets, the demand for jewellery and a steady demand for gold as a means of long-term investment currently account for roughly 90% of gold consumption worldwide, while the other 10% is allocated for industrial use.

The industrial demand for gold, which comes mainly from dentistry and electronics, has been declining over time. However, the sociocultural factors that sustain the market for jewellery in Asia, primarily in China and India, who enjoy their healthy economic growth, have also ensured a stable demand for physical gold in the world. In fact, China and India lead the rest of the world by far, consuming annually almost a thousand tons each. Notably, China being the largest gold producer on the planet, covers less than 50% of its consumption with its own production. 

The demand for gold as an investment has been increasing over time and quite dramatically so from 2002. Investors are mainly interested in gold bars and coins, and since 2003 the gold Exchange Traded Funds (ETFs) have also been a positive contributor. Additionally, low-interest rates for US Treasuries push away investors who resort to buying gold as a safe-haven asset. According to Citigroup Inc, all of the factors mentioned above may very well rally the prices for gold to a record $2,000+ an ounce in the next two years.

Note that historically, gold prices had periods of high volatility, which may have a positive correlation with the price action for other asset classes (stocks, bonds, commodities) during a financial crisis.

Silver

Global demand for silver is driven by its many industrial uses, which account for more than half of total supply of silver over the past five years. This makes gold prices far less susceptible to economic growth than the prices for silver. The global industrial use is only 10-15% of the total annual supply of gold while jewellery and investment account for the rest.

Traits such as malleability, physical strength, brilliance, and ductility make silver such a popular choice for use in jewellery, tableware, and ornamentation for millennia while the metal’s conductivity as well as its antibacterial qualities and sensitivity to light keep silver in demand from multiple industries.

On the other hand its industrial use popularity may negatively affect the price during economic slowdowns.

Platinum group metals

Platinum group metals are noble, precious metals that are relatively new investment metals. Given that platinum and the platinum group metals are mostly used in industrial applications, their price volatility is much higher than that of gold, and historically it is more correlated with industrial commodities. 

Platinum as an investment is much less common than gold or silver. Investing in platinum as a base for consumer jewellery also is not a notable trend. However, platinum is more suitable for exclusive high-priced jewellery because it's harder and thus less susceptive to wear-and-tear than gold or silver (compare that to gold that's at 90%+ purity is rather soft).

Platinum group metals provide for diversification of risks and getting exposure for catching potential upside in case of growth of popularity in jewellery and investments.

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