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Interview with Charlotte Peuron, fund manager at Crédit Mutuel Asset Management.

Photo Charlotte Peuron
Charlotte Peuron

After a strong start to the year due to banking risk and expectations that interest rates will end, gold entered a phase of wait and see approach and consolidation. Indeed, we reached all time highs on 4 May at close to 2063 dollars per ounce of gold at the meeting, and closed August at $1941.78. The evolution of the price of gold is clearly data dependent, like the central banks and in particular the FED. Indeed, due to persistent inflation and ultimately a much stronger economy, the latter has not finished its monetary tightening, pushing up real interest rates and its currency. However, despite these two negative drivers and still low ETF flows Gold is proving particularly resilient. The prospect of a slowdown remains strong and this is clearly a support for gold.

Emerging market central banks are still very long on gold, as evidenced by the 55 tons bought in July alone.
In China, jewellery demand rose sharply in July (+22% m/m) due to the dual effect of the end of lockdowns and the local Valentine's Day. Chinese investors also increased their holdings of gold ETFs (listed in Shanghai) to protect themselves from the economic slowdown.
Finally, the price of gold remained firm due to discussions on the introduction by the BRICS (Brazil, Russia, India, China and South Africa) of a new gold backed currency that could be used for international payments. Business to watch!

In terms of company earnings, stock picking is becoming more important. Medium sized companies, where single asset companies tend to do well in the first half of 2023. In addition, they reiterated their objectives for the year as a whole. With gold prices higher than expected, producers' profit margins average around 700 dollars per ounce. Companies generate a lot of cash flow. This allows many companies to do exploration to increase future production, as well as return to shareholders. Alamos Gold continued to perform well on the back of cost containment. Better production at the Mulatos mine exceeded expectations. For majors like Newmon, Barrick and Goldfields, the results are more mixed, ‘big is not so beautiful.’ Royalties companies, such as Osisko Royalties, also had a good earnings season.
As for the juniors and developers, which are still undervalued, these seem to us potential targets. Lastly, M & A is still on the verge of growth.

In these markets with no strong trend, we are keeping our funds stable without any major changes over the summer. We think that macroeconomic catalysts should materialise over the quarter to give the ‘LA’ shape to the future trend for precious metals. Pending a clearer direction, we are keeping a large component (8% on average of our portfolio) of copper companies. Indeed, cyclical issues in China are providing respiration from copper prices, and we believe that the structural trend in future needs should be a long term investment opportunity in this segment.

Drafting completed on 8 September 2023

The reference to certain securities is for information purposes only. It is not intended to promote direct investment in these instruments and does not constitute investment advice.

CM AM Global Gold is exposed to the following risks : risk of capital loss, equity market risk, risk associated with investing in small cap equities, emerging markets investment risk, credit risk, interest rate risk, counterparty risk, currency risk, risk associated with the impact of techniques such as derivatives, legal risk, operational risk liquidity risk.

Document for professionals. The information contained in this document does not constitute investment advice and is consulted under your sole responsibility. Investing in a fund may present risks, investors may not get back the amount invested. This fund is managed by Charlotte Peuron, portfolio manager at Crédit Mutuel Asset Management, a management company approved in France by the AMF under number GP 97-138, a Société Anonyme (public limited company) with share capital of euros3871680. Paris headquarters and offices: 4 rue Gaillon 75002 Paris, Strasbourg offices: 4 rue Frédéric Guillaume Raiffeisen 67000 Strasbourg, RCS Paris 388,555,021 - APE code 6630Z, intra community VAT: FR 70,388,555 021.Crédit Mutuel Asset Management is an entity of Crédit Mutuel Alliance Fédérale. The fund may not be sold, advised to buy or transferred, by any means whatsoever, to the United States of America (including its territories and possessions), nor may it directly or indirectly benefit any US Person, including any natural or legal persons, resident or established in the United States.