Nyheter
Rebalancing Markets Fuel Positive Sentiment for Hard Assets
3Q’16 Hard Assets Equities Strategy Review and Positioning Our hard assets equities strategy’s positions in Energy and Diversified Metals & Mining sectors were, in particular, significant contributors to positive performance. Within the Energy sector, positive performance stemmed mainly from the Oil & Gas Exploration & Production (E&P) sub-industry. The Oil & Gas Drilling sub-industry also made a useful contribution to performance during the quarter. By contrast, Oil & Gas Equipment & Services was the only energy sub-industry to detract from the strategy’s performance and its impact was relatively minimal. Other sub-industries that made positive contributions of note to performance were Copper and Coal & Consumable Fuels. During the quarter, the strategy continued to hold no position in Integrated Oil & Gas.
3Q Performance Contributors
The top performing company was major diversified mining company Glencore,1 which continued to benefit from debt reduction and overall restructuring initiatives that began in 2015. In the face of persistent skepticism from the market, Glencore has proved demonstrably that it has been able to provide a workable blueprint and subsequently execute its plan to deleverage its balance sheet and improve its cost structure. Not only has Glencore delivered (as we expected) thus far on what it said it would do, it continues to implement its debt reduction program. This has, in some instances, been in contrast with other major metal mining companies that, despite rhetoric to the contrary, have been slow to recognize the need for, or have been unsuccessful in, executing similar restructuring measures and have largely been playing ”catch up” with Glencore in the eyes of the market.
Rounding out the top 5 performing positions were E&P companies, Pioneer Natural Resources,2 Parsley Energy,3 and SM Energy.4 These companies benefited from the high quality of their assets and acreages, in particular those in the Permian Basin. The final top five contributing company for the quarter was metal mining company Teck Resources5 which benefited from strengthening zinc and coal prices.
3Q Performance Detractors
Over the past three years, global demand for coking coal has been relatively solid at an annual level of around 990 million tonnes (Mt). China is one of the most important consumers in terms of setting prices, since it accounts for approximately 60%, or 590Mt, of global coking coal demand. It is followed by Japan at 69Mt, India at 49Mt, and South Korea at 40Mt. Demand from the U.S. is for approximately 21Mt per annum.
In a reversal from the second quarter when gold was the strongest performing sub-industry, in the third quarter, gold was the largest detractor from Fund performance. Gold mining companies Barrick Gold,6 Goldcorp,7 and Randgold Resources8 all suffered from a consolidation in the gold price during the period, and by quarter end we had reduced our exposure to each. The two other poor performers during the quarter were E&P companies Hess,9 which had to contend with a dry hole in Guyana, and Gulfport Energy.10
Positive Market Sentiment and Demand for Commodities in 3Q
Despite the continuing uncertainties in the market surrounding the U.S. presidential elections, and in the face of moderating global GDP growth, sentiment was on the positive side and demand for commodities remained remarkably resilient. As in the second quarter of the year, the most significant macroeconomic factor influencing the hard assets strategy was the extraordinary monetary accommodation extended by central banks around the world, which continues to add support for economic growth and demand for commodities.
Gold Consolidated After 2Q Rally
After an explosive first half of the year, the gold market experienced significant consolidation during the third quarter and gold mining companies suffered. On a positive note, gold mining firms overall have been bolstered by restructuring and strategic improvements and appear well positioned to withstand a short-term decline in the gold price.
Global Demand for Crude Oil Remained Strong
Global demand for crude oil and, in particular, gasoline increased once again during the quarter. U.S. gasoline demand remains at record highs and the country is now consuming approximately 10 million barrels a day. The country’s gasoline demand continues to exceed the unrefined crude oil demand of every country in the world except China.
Supply disruptions with the potential to impact future production continued during the quarter including the lingering effects of attacks instigated by militant groups in Nigeria, an uncertain and confusing political situation in Libya, and a deteriorating economic and social environment in Venezuela, where production had fallen some 6% from approximately 2.35 million barrels a day (bbl/d) at the beginning of the year to approximately 2.2 million bbl/d by the end of the quarter. On a positive note, oil sands production in Canada was no longer affected by the wild fires that impeded second quarter production.
U.S. Oil Rig Count Rebounded Slightly
In the U.S., the rig count continued to rebound slightly and increase at a modest pace from previous trough levels. However, we continue to note and emphasize that any rebound remains very much incremental when compared with the nearly 1,300 rigs in the U.S. that were taken out of commission between 2014 and 2016.
Zinc and Coking Coal Excelled for Base/Industrial Metals
In the base metals space, zinc experienced further rebalancing of supply and demand. Fundamentals continued to tighten with a reduction in overall supply accompanied by solid demand (Read Zinc’s Year to Remember: A Supply-Side Story for details). Nickel markets erased losses from early in the quarter following the results of environmental mine audits in the Philippines in which three quarters of mines fell short, with 20 mines facing suspension, and an announcement by Indonesia that the ban on exports was being reconsidered. At the company level, restructuring continues. Balance sheet strengthening appears to be the primary objective with reducing operating costs a secondary focus. Additionally, we are just now starting to hear chatter from some companies about re-engaging growth projects.
By the end of the quarter, the prices of metallurgical coal (an essential steel-making raw material used to produce coke which, in turn, is used in the production of steel) had climbed more than 100% since the beginning of the year. The overwhelming driver behind this price recovery has been supply. In addition to both lower seaborne and domestic supply, global inventories are also at multi-year lows.
Deal Activity Dominated the Agriculture Sector
In the agriculture sector, the quarter was marked by two major deals and the potential for further consolidation in the potash market amid oversupply. U.S. agriculture giant, Monsanto, agreed to be bought by German giant Bayer11 while Canada’s Agrium12 and PotashCorp13 of Saskatchewan agreed to merge. In grains, an ideal growing season in the U.S. lead to close to record production in both corn and soybean.
Positive Outlook for Remainder of the Year
In the fourth quarter, we see the macro drivers continuing to be central bank policy and the ramifications of the forthcoming presidential election in the U.S. Broadly speaking, commodity demand has proven to be remarkably resilient. Despite concerns about global growth there is still firm demand and healthy consumption. On the supply side, we continue to see the effects from the lack of investment and capital expenditure reductions over the past several years.
OPEC Production Decision Puts Focus on Saudi Arabia and Iran
At the very end of the quarter, OPEC (Organization of the Petroleum Exporting Countries) came to an agreement to cap production. This move appears to us to indicate that Saudi Arabia and other OPEC members have reached their threshold of pain, which appears to be roughly in the $40 to $45 price-per-barrel range. Anything below that would probably only serve to consolidate and accelerate any decisions they might make as a group which indicates that, surprisingly, there may actually be a price floor.
Mainstream interpretation seems to be that the OPEC announcement is a reaction to $40 oil. Maybe it is, but we believe it could also be the excuse that Saudi Arabia has needed to allow it to force through some serious, and absolutely essential, economic restructuring. It now has the low price of oil to blame publicly.
Saudi Arabia is Worried About Oil Price Spike in Next 18 to 24 Months
We believe that the move by Saudi Arabia is a longer-term one and that, in particular, it demonstrates the country is also worried about a spike in oil prices in the next 18 to 24 months. Any such spike may: a) help Iran the most (something Saudi Arabia is not too keen on doing); b) eventually cause the price to plummet back down; and c) accelerate alternative energy use. Evidence of this can be seen in the press release issued by OPEC following its September meeting, in which it said that its objective was ”to stabilize the oil market and avoid the adverse impacts in the short- and medium-term.”
We also see this move as a way for Saudi Arabia to indicate to Iran that it is happy for the country to try and ramp up production from 3.6 million to 4 million barrels a day (something Iran is struggling to do as shown in Chart A) over the next four to five years. The Saudis are fully aware that this is extremely unlikely to happen any time soon as Iran has only hit the 4 million barrels per day figure three times since 1978.
Iranian Crude Oil Production
Monthly in Barrels: 12/31/79 to 9/30/16
(Click to enlarge) Source: Bloomberg. Data as of September 30, 2016.
While the focus is squarely on Saudi Arabia and Iran, among other OPEC nations, despite the political uncertainty in Libya mentioned earlier, there do appear to be some moves toward establishing some sort of unified government and we have seen the beginning of some flows of oil in the country.
We continue to point out that it is easy to fall into the trap of thinking that a simple increase in the current U.S. onshore oil rig count of approximately 400 rigs can restore the supply balance. But people forget that the U.S. rig count at its high numbered close to 1,700 in 2014 and that it has declined more than 75%, or 1,300 rigs, since then. It will take a considerable increase in the current rig count to bring back any growth in production.
In addition, people continue to miss the fact that conventional exploration has been abysmal (discoveries in 2015 were the lowest since 1947 as shown in Chart B), a point that was also hinted at in OPEC’s press release when it was stated that the ”Conference … noted that world oil demand remains robust, while the prospects of future supplies are being negatively impacted by deep cuts in investments and massive layoffs.”
Conventional Oil Discoveries Are in Decline
Yearly in Barrels: 1947 to 2016
(Click to enlarge) Source: Wood Mackenzie; Bloomberg. Data as of August 31, 2016.
U.S. Shale Oil Production Will Need Time to Ramp Back Up
As usual, during the quarter we made a number of trips outside the U.S. and met with many prospective and existing clients. During our visits we noted a recurrent theme of strong skepticism around the rebalancing of commodity markets and, in particular, oil. We believe that much of this has been fueled by headlines that trumpet Saudi and Russian oil production reaching all-time highs, and talk of the strength of the rebound in the oil rig count in the U.S.
People seem to truly believe that shale oil is a spigot that can just be turned on and off at will, and there continues to be a misplaced belief that higher oil prices will reinvigorate shale drilling to the point where it starts to raise production and ”unbalance” the fundamentals. We do not believe this to be the case and, in our view, any increase in U.S. production must be preceded by a dramatic increase in the rig count which will require significantly higher crude prices.
POST DISCLOSURE
1 Glencore represented 4.05% of Fund net assets as of 9/30/16.
2 Pioneer Natural Resources represented 3.98% of Fund net assets as of 9/30/16.
3 Parsley Energy represented 3.92% of Fund net assets as of 9/30/16.
4 SM Energy represented 2.42% of Fund net assets as of 9/30/16.
5 Teck Resources represented 3.20% of Fund net assets as of 9/30/16.
6 Barrick Gold represented 1.48% of Fund net assets as of 9/30/16.
7 Goldcorp represented 2.29% of Fund net assets as of 9/30/16.
8 Randgold Resources represented 2.25% of Fund net assets as of 9/30/16.
9 Hess represented 2.04% of Fund net assets as of 9/30/16.
10 Gulfport Energy represented 2.05% of Fund net assets as of 9/30/16.
11 Bayer represented 0.00% of Fund net assets as of 9/30/16.
12 Agrium represented 1.84% of Fund net assets as of 9/30/16.
13 PotashCorp represented 0.00% of Fund net assets as of 9/30/16.
by Shawn Reynolds, Portfolio Manager
Reynolds has more than 30 years of experience covering the energy sector. Before his career in finance, Reynolds worked as an exploration geologist and earned degrees in geology and engineering.
As April winds down, markets remain on edge, with escalating tariffs and renewed trade tensions keeping volatility in focus. In this summary of our full-length newsletter, we spotlight gold and gold equities, both of which have surged to record levels. We also take a step back from the day-to-day noise in crypto to explore the broader shifts in the regulatory landscape in our latest Whitepaper and present Celestia in detail. Finally, we assess how Moat indexes have held up and evolved amid the turbulence.
Your VanEck Europe team wishes you a great read.
Featured Articles
🥇 Are Gold Mining Equities Regaining Attention Amid Rising Gold Prices?
Gold & Gold mining equities tend to shine during stress periods
Source: VanEck, World Gold Council.
Gold has attracted renewed interest from investors amid concerns about inflation, currency volatility, and overall market uncertainty. Gold mining companies have recently reported improved profit margins and cash generation, with some initiating share buybacks and maintaining relatively strong balance sheets. Despite these developments, many continue to trade below their historical valuation averages.
While historical trends indicate that gold and gold mining equities have outperformed during certain periods of market stress, these patterns may not repeat under different economic conditions. Performance can be influenced by a range of factors including interest rates, central bank policy, geopolitical developments, and investor sentiment.
→ Read more
⚖️ Whitepaper Highlights: How New Crypto Regulations May Shape the Future
Cryptocurrencies are entering a new era. With the re-election of Donald Trump and the implementation of the European Union’s Markets in Crypto-Assets (MiCA) regulation, digital assets are moving into a landscape defined not just by innovation, but also by regulatory clarity.
MiCA’s structured and transparent approach aims to promote legitimacy, safeguard investors, and enhance trust in digital asset markets across Europe. It could also serve as a blueprint for other jurisdictions looking to regulate crypto effectively.
→ Read the Whitepaper Highlights
⛓️ Introduction to Celestia
Most blockchains, like Ethereum or Bitcoin, are monolithic which means they perform all major functions (consensus, data availability, and execution) on a single layer. This design ensures security but according to new modular networks, limits scalability and flexibility.
The modular blockchain thesis, which Celestia is leading, proposes separation of layers and respective responsibilities in the network.
→ Read more
Note: This article in not accessible to our UK readers.
🌊 Riding the Gold Wave
Chasing the Vein: Fund Flows into Gold Miners
Source: Mining.com. Data as of 21 March 2025. Note: Data covers 493 funds with combined assets under management of $62 billion.
U.S. equity markets experienced significant declines during the month of March. Meanwhile, spot gold price recorded new all-time highs, surpassing the $3,000 per ounce mark on 14 March and closing at a record price of $3123.57 on March 31, a 9.30% ($265.73) monthly gain. As of 31 March, gold prices have risen by 93.61% over the past five years (1). Investors should keep in mind that past performance is not representative of future results.
The gold miners, as represented by the NYSE Arca Gold Miners Index (GDMNTR), outperformed significantly, up 15.51% during March (2). This gain reflects both their operational leverage to rising gold prices and market perceptions of relative value. However, gold miners can also be subject to heightened volatility, operational risks, and sensitivity to commodity price swings.
While gold and gold equities may serve as diversifiers in a portfolio due to their historically low correlations with many asset classes, investors should remain mindful of the inherent risks, including price volatility, currency movements, and shifts in investor sentiment that can lead to rapid reversals in performance.
→ Read more
🌪️ Moat Stocks Weather Tariff Tumble
Market turbulence in March weighed on stocks. The Moat Index was not immune to the market turmoil, as it declined along with the broad U.S. equity market ending the month lower. However, the Moat Index showed resilience relative to the S&P 500—thanks in part to defensive sector resilience and underweight exposure to mega-caps.
At the same time, the SMID Moat Index lagged small and mid-caps in March. Smaller U.S. stocks were also impacted by global trade tensions and economic growth concerns with the broad small- and mid-cap benchmarks falling during the month. However, year-to-date, the SMID Moat Index remains ahead of the broader small- and mid-cap markets.
This is a preview of our monthly ETF insights email newsletter.
To receive the full version, sign up here.
(1) Source: World Gold Council, ICE Data Services, FactSet Research Systems Inc.
(2) Source: Financial Times.
IMPORTANT INFORMATION
This is marketing communication. Please refer to the prospectus of the UCITS and to the KID/KIID before making any final investment decisions. These documents are available in English and the KIDs/KIIDs in local languages and can be obtained free of charge at www.vaneck.com, from VanEck Asset Management B.V. (the “Management Company”) or, where applicable, from the relevant appointed facility agent for your country.
For investors in Switzerland: VanEck Switzerland AG, with registered office in Genferstrasse 21, 8002 Zurich, Switzerland, has been appointed as distributor of VanEck´s products in Switzerland by the Management Company. A copy of the latest prospectus, the Articles, the Key Information Document, the annual report and semi-annual report can be found on our website www.vaneck.com or can be obtained free of charge from the representative in Switzerland: Zeidler Regulatory Services (Switzerland) AG, Neudtadtgasse 1a, 8400 Winterthur, Switzerland. Swiss paying agent: Helvetische Bank AG, Seefeldstrasse 215, CH-8008 Zürich.
For investors in the UK: This is a marketing communication targeted to FCA regulated financial intermediaries. Retail clients should not rely on any of the information provided and should seek assistance from a financial intermediary for all investment guidance and advice. VanEck Securities UK Limited (FRN: 1002854) is an Appointed Representative of Sturgeon Ventures LLP (FRN: 452811), which is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, to distribute VanEck´s products to FCA regulated firms such as financial intermediaries and Wealth Managers.
This information originates from VanEck (Europe) GmbH, which is authorized as an EEA investment firm under MiFID under the Markets in Financial Instruments Directive (“MiFiD). VanEck (Europe) GmbH has its registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, and has been appointed as distributor of VanEck products in Europe by the Management Company. The Management Company is incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM).
This material is only intended for general and preliminary information and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed.
Morningstar® Wide Moat Focus IndexSM, Morningstar® US Sustainability Moat Focus Index, Morningstar® US Small-Mid Cap Moat Focus IndexSM, and Morningstar® Global Wide Moat Focus IndexSM are trademarks or service marks of Morningstar, Inc. and have been licensed for use for certain purposes by VanEck. VanEck’s ETFs are not sponsored, endorsed, sold or promoted by Morningstar, and Morningstar makes no representation regarding the advisability of investing in the ETFs. Morningstar bears no liability with respect to the ETFs or any securities.
Effective December 15, 2023, the carbon risk rating screen was removed from the Morningstar® US Sustainability Moat Focus Index. Effective December 17, 2021, the Morningstar® Wide Moat Focus IndexTM was replaced with the Morningstar® US Sustainability Moat Focus Index. Effective June 20, 2016, Morningstar implemented several changes to the Morningstar® Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to that date.
NYSE Arca Gold Miners Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by VanEck UCITS ETF plc (the “Fund”) in connection with the ETF. Neither the Fund nor the ETF is sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding the Fund or the ETF or the ability of the NYSE Arca Gold Miners Index to track general stock market performance. ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA GOLD MINERS INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. ICE Data Indices, LLC and its affiliates (“ICE Data”) indices and related information, the name “ICE Data”, and related trademarks, are intellectual property licensed from ICE Data, and may not be copied, used, or distributed without ICE Data’s prior written approval. The Fund has not been passed on as to its legality or suitability, and is not regulated, issued, endorsed’ sold, guaranteed, or promoted by ICE Data.
The S&P 500 Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2020 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
It is not possible to invest directly in an index.
Investing is subject to risk, including the possible loss of principal. Investors must buy and sell units of the UCITS on the secondary market via an intermediary (e.g. a broker) and cannot usually be sold directly back to the UCITS. Brokerage fees may incur. The buying price may exceed, or the selling price may be lower than the current net asset value. The indicative net asset value (iNAV) of the UCITS is available on Bloomberg. The Management Company may terminate the marketing of the UCITS in one or more jurisdictions. The summary of the investor rights is available in English at: complaints-procedure.pdf (vaneck.com). For any unfamiliar technical terms, please refer to ETF Glossary | VanEck.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck (Europe) GmbH ©VanEck Switzerland AG © VanEck Securities UK Limited
April in ETFs: Gold at New Highs, Crypto in Transition, and Moat Index Holding Steady
BBVAE ETF är en spansk ETF som spårar Eurostoxx 50
The Art of Meme-ing: How Dogecoin Redefined Value
VGGF ETF köper statsobligationer från hela världen
Vilka ETFer investerar i europeiska Small Cap-aktier?
Montrose storsatsning på ETFer fortsätter – lanserar Sveriges första globala ETF med hävstång
MONTLEV, Sveriges första globala ETF med hävstång
Sju börshandlade fonder som investerar i försvarssektorn
Världens första europeiska försvars-ETF från ett europeiskt ETF-företag lanseras på Xetra och Euronext Paris
Europeisk försvarsutgiftsboom: Viktiga investeringsmöjligheter mitt i globala förändringar
-
Nyheter4 veckor sedanMontrose storsatsning på ETFer fortsätter – lanserar Sveriges första globala ETF med hävstång
-
Nyheter4 veckor sedanMONTLEV, Sveriges första globala ETF med hävstång
-
Nyheter4 veckor sedanSju börshandlade fonder som investerar i försvarssektorn
-
Nyheter4 veckor sedanVärldens första europeiska försvars-ETF från ett europeiskt ETF-företag lanseras på Xetra och Euronext Paris
-
Nyheter4 veckor sedanEuropeisk försvarsutgiftsboom: Viktiga investeringsmöjligheter mitt i globala förändringar
-
Nyheter3 veckor sedan21Shares bildar exklusivt partnerskap med House of Doge för att lansera Dogecoin ETP i Europa
-
Nyheter2 veckor sedanHANetfs Tom Bailey om framtiden för europeiska försvarsfonder
-
Nyheter1 vecka sedanFastställd utdelning i MONTDIV april 2025
