Videos

Seasoned investment professionals, sector-dedicated analysts, and creative thinkers are at the heart of our business. Get their perspective on today's market climate.

Gold and Precious Metals

Video Transcript

Gold Market Healthy Despite Sluggish Stocks


TOM BUTCHER: Recently, gold has being going up and gold stocks have been going down. What has been going on?


IMARU CASANOVA: When you look at the performance of the stocks year to date, you will notice that they had been outperforming gold [bullion], as they should in a rising gold price environment, up until about mid April. In April, gold increased about 1.5% while gold stocks were down. The gold miners index, the GDM,1 was down almost 2%, and the junior gold miners index2 was down almost 11%.


Where does this underperformance come from? In the case of the larger cap equities, the underperformance was driven by a 12% drop in the share price of Barrick Gold.3 Barrick Gold represents about 10% of the GDM. On April 24, Barrick Gold reported Q1 2017 results that missed expectations, and although the "miss" was driven by operational issues that are temporary in nature and the company expects to resolve them shortly, the market took it very negatively. The market reacted negatively because Barrick Gold has consistently, over recent years, met or exceeded expectations.


In the case of the junior gold companies, we believe the underperformance was related to trading activity that followed an announcement on April 12 regarding a rule change for the junior gold miner Index (MVGDXJTR).2 The rule change expands the number of companies that can be included in the Index. It appears that the market's reaction was to sell down those names that are expected to be reduced. We expect this high volatility to continue affecting many of those names until the rebalance date. The rule change is not effective until June 17. We don't know exactly what companies are going to be added or deleted, so this volatility will probably continue until then. In the longer term, we expect companies to trade in line with fundamentals.


BUTCHER: I understand companies are now reporting Q1 earnings. What have the results been like?


CASANOVA: Results have generally been pretty good. There were some negative surprises, but for the most part, companies are reporting results that are in line with expectations or above expectations. The health of the sector, in general, is very good. Costs are contained and now the gold mining companies are back to focusing on their growth projects and exploration.


BUTCHER: Does any company, in particular, stand out?


CASANOVA: Yes. Agnico Eagle,4 which is one of our strategy's top holdings, had a phenomenal quarter. The company beat expectations for earnings, for production, for costs, and have increased their 2007 production guidance. They have met or exceeded expectations and improved guidance now for several years. I think this justifies why Agnico Eagle trades at a premium. It meets expectations, it has an unmatched growth profile. We estimate Agnico production will grow about 25% in the next five years, while most of the other seniors are struggling to sustain production. It also has an excellent pipeline of projects that are likely to increase the company's potential for further discoveries.


- - - - - - - - - -
IMPORTANT DISCLOSURE


1GDM refers to the NYSE Arca Gold Miners Index (GDMNTR). GDMNTR is a modified market capitalization-weighted index composed of publicly traded companies involved primarily in the mining for gold. The Index is calculated and maintained by the New York Stock Exchange.


2MVGDXJR refers to the MVIS Global Junior Gold Miners Index. MVGDXJTR is a rules-based, modified market capitalization-weighted, float-adjusted index comprised of a global universe of publicly traded small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company's revenue from gold or silver mining when developed, or primarily invest in gold or silver.


3Barrick Gold Corporation was 1.89% of the VanEck International Gold Fund as of 4/28/2017.


4Agnico-Eagle Mines Limited was 5.49% of the VanEck International Gold Fund as of 4/28/2017.


The views and opinions expressed are those of the speaker and are current as of the video's posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about VanEck Funds, VanEck Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.


Please note that Van Eck Securities Corporation offers investment products that invest in the asset class(es) included in this video. Gold-related investments are subject to risks associated with precious metals, market risk, industry concentration, inflation, foreign securities, frequent trading, short-sales, leverage, and non-diversification.


Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.


Investing involves risk, including possible loss of principal. An investor should carefully consider investment objectives, risks, charges and expenses of the investment company before investing. Call 800.826.2333 or click below to obtain a prospectus and summary prospectus which contain this and other information. Please read the prospectus and summary prospectus carefully before investing. A Fund prospectus is available at vaneck.com.


No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © Van Eck Securities Corporation.


Van Eck Securities Corporation, Distributor
666 Third Avenue, New York, NY 10017