Most have heard the adage “sell in May and go away” in equity markets. This market wisdom refers to traditional weakness in equities from May to October, suggesting investors should sell in May and buy back again in November. Equities are different from commodities and in both markets, history doesn’t necessarily repeat itself.
One metal that did not take the summer off was Gold. Gold started Q3 2024 at $2332/oz (1 July 2024) and finished 90 days later at $2634/oz (30 Sep 2024). When measured against a 3m T bill rate of 5.3% (risk-free rate), gold generated an annualized excess return of 54%. The strength in gold is a welcome sign for the industry more broadly, considering 50% of all drilling investment targets gold, and the entire complex benefits from this early-stage investment.
Moving more broadly, the other two major markets that closed the quarter strongly were Copper and Iron Ore. Initial price weakness due to rising inventories and lower summer demand was offset late in the quarter by a weakening USD, along with the US Fed Reserve decision to cut interest rates by -50bps and Chinese NDRC choosing to stimulate.
Figure 1: Relative Change in Commodity Prices (Q3 2024)
In this quarterly update, RCF has chosen to highlight the performance of gold, copper and iron ore for two principal reasons:
- Gold, copper and iron ore are in the growth phase of the cycle, and
- These markets are significantly larger than the other metals markets within the overall sector (please see Figure 2 below)
Figure 2: Metals & Mining – Relative Production and Market Value
The key takeaways for Q3 2024 are:
- A declining USD and lower interest rates continue to provide macro tailwinds behind global metal & mining fundamentals
- Gold is leading the way into the growth phase of the cycle; and
- Industrial metals and metals & mining equities are now responding and starting to close the gap.
We believe the investment environment is growing more compelling for strategic supply-side investment.
Important Information
This material is provided for educational purposes only and should not be construed as research. The information presented is not a complete analysis of the commodities landscape.
Forward-looking statements are presented for illustrative purposes only and are not guarantees of future performance. Actual performance will vary due to a variety of factors, including general economic conditions. Neither RCF nor any independent third party has independently audited or verified this information.
The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Resource Capital Funds and/or its affiliates (together, “RCF”) to be reliable. No representation is made that this information is accurate or complete. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
None of the information constitutes a recommendation by RCF, or an offer to sell, or a solicitation of any offer to buy or sell any securities, product or service. The information is not intended to provide investment advice. RCF does not guarantee the suitability or potential value of any particular investment. The information contained herein may not be relied upon by you in evaluating the merits of any investment.
References to market, composite, or commodity specific indices, determined by a third party, are provided for informational purposes only. Index information was compiled from sources that RCF believes to be reliable. No representation or guarantee is made hereby with respect to the accuracy or completeness of such data. Reference to an index does not imply that a fund will achieve returns or other results similar to the index. These indices cannot be invested in directly by a fund or other investors. The market volatility, liquidity, concentrations, restrictions and other characteristics of private market investments are materially different from indices, and therefore the indices do not necessarily reflect a basis for comparison with private market investments. The performance of these indices is reported on the gross performance of the underlying assets and does not take into account any fees or expenses that may be associated with investing in those assets. Any attempt to mimic the indices will result in fees and expenses associated with investing and will reduce performance.
Past performance is not indicative of future results. Investing involves risk, including possible loss of principal.