The recent invasion of Ukraine by Russia has caused investors to turn their eyes away from the US Federal Reserve (Fed) and towards geopolitics.

 

Many are now worried less about the Fed’s interest rate tightening schedule and more about energy prices and geopolitics. As a result, gold has awoken from its slumbers (having been in a consolidation pattern for the past 18 months). Now, some are wondering what all this will mean for gold miners and indeed silver during coming quarters. Generalist investor participation in the gold and silver mining space is still at historic lows, and the fund’s performance relative to the underlying metal is geared to those flows, reflected most clearly in the gold/silver ratio (see chart below). 

Gold silver cross (price of gold in silver) 

Why geopolitics is turning eyes towards gold chart1

Source: Bloomberg, as of 22.02.2022 

Mining companies have struggled during a year and a half of retracement in the US dollar-denominated gold price (between late 2020 and February 2021). Their operating margins have narrowed in the face of rising input costs. This environment has affected silver miners more than gold miners. Silver miners have naturally lower operating margins and therefore more sensitivity to silver price movements. This should be to the fund’s benefit, in our view, as things improve, because the silver miners are highly geared to rising prices. The gold/silver ratio remains elevated at about 80:1, but as participation broadens, we believe this ratio should fall, driving the relative performance of the fund.

 

Investors should be aware of sector concentration risk: the fund’s investments are concentrated in natural resource companies, and may be subject to a greater degree of risk and volatility than a fund following a more diversified strategy. Silver tends to outperform gold in a rising gold price environment and it tends to underperform gold when sentiment moves against the sector. The fund may be subject to other risk factors: please see the Prospectus for a more detailed explanation of the fund’s risks. 

The fund has shown periods of ‘lag and then leap’, compared with the gold price 

Why geopolitics is turning eyes towards gold chart2

Source: Jupiter, FactSet, as of 21.02.2022 

As can be seen from the graph above, at the start of a new period of rising gold prices, the fund tends to lag the move of pure gold mining products (and even of bullion over short periods) due to the nature of silver, which the fund also holds, and which lags and then plays catch up. This ‘lag and then leap’ character of the fund was seen twice during 2020 (see highlighted areas of chart) and this current environment feels similar, in our view. Initially, investment capital tends to flow into the largest gold miners (like Barrick) before percolating down into the mid-cap gold producers and then in due course the silver and silver miners that we own.

 

In our view, the current situation looks positive for the fund. Firstly, the Fed is looking as hawkish as it can be. Secondly, market expectations of inflation halving in the second half of 2022 are as optimistic as one could imagine. Thirdly, the Ukraine conflict has not yet reached its endgame. 

Performance

JUPITER GOLD & SILVER FUND (I USD ACC) 

Rolling 12 month performance. As at 31.01.22 

Past performance is not a guide to future performance. Returns may increase or decrease as a result of currency fluctuations.

 

Benchmark is 50% Gold Price (XAU), 50% FTSE Gold Mines Index with net dividends re-invested.
The benchmark is a point of reference against which the performance of the Fund may be measured. Source: Factset. © Morningstar. All Rights Reserved. I EUR Accumulation terms. All information as at 31/01/2022 unless otherwise stated. On 3rd December 2018 the benchmark changed from Gold price (XAU) to 50% Gold Price (XAU), 50% FTSE Gold Mines Index with net dividends re-invested. The composite benchmark is not expected to include exposure to silver, therefore although a large proportion of the Fund’s investments may be components of the composite benchmark, the Fund has the ability to deviate significantly from the composite benchmark for example, as a result of the fund’s exposure to silver. 

The value of active minds: independent thinking

 

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important Information

On the 15 February 2021, the Merian Gold & Silver Fund changed its name to the Jupiter Gold & Silver Fund.

 

This is a marketing communication. Please refer to the latest sales prospectus of the sub-fund and to the Key Investor Information Document (KIID), particularly to the sub-fund’s investment objective and characteristics including those related to ESG (if applicable), before making any final investment decisions.

 

This commentary is intended for investment professionals and is not for the use or benefit of other persons, including retail investors.

 

This commentary is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. Initial charges are likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term.

 

[Past performance is not a guide to future performance.] Holdings examples are for illustrative purposes only and are not a recommendation to buy or sell. The views expressed are those of the Fund Manager at the time of writing, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information provided but no assurance or warranties are given.

 

This is not an invitation to subscribe for shares in the Jupiter Asset Management Series plc (the Company) or any other fund managed by Jupiter Asset Management (Europe) Limited or Jupiter Investment Management Limited. The Company is an investment company with variable capital established as an umbrella fund with segregated liability between sub-funds which is authorised and regulated by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as amended. Registered in Ireland under registration number 271517. Registered office: 33 Sir John Rogerson’s Quay, Dublin 2, Ireland.

This information is only directed at persons residing in jurisdictions where the Company and its shares are authorised for distribution or where no such authorisation is required.
The sub fund(s) may be subject to various other risk factors, please refer to the latest sales prospectus for further information.
Prospective purchasers of shares of the sub fund(s) of the Company should inform themselves as to the legal requirements, exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile. Subscriptions can only be made on the basis of the latest sales prospectus and the Key Investor Information Document (KIID), accompanied by the most recent audited annual report and semi-annual report. These documents are available for download from www.jupiteram.com or can be obtained free of charge upon request from any of:

 

EU/EEA countries in which the Company is registered for distribution: Unless otherwise specified in this document, Citibank Europe plc (the Company’s Administrator) is responsible for processing subscription, repurchase and redemption orders and making other payments to Shareholders. Citibank Europe plc, 1 North Wall Quay, Dublin 1, Ireland, email: [email protected].
The following information and documents are available from www.eifs.lu/jupiteram: Information on how orders (subscription, repurchase and redemption) can be made and how repurchase and redemption proceeds are paid; Information and access to procedures and arrangements related to investors’ rights and complaints handling; Information in relation to the tasks performed by the Company in a durable medium; The latest sales prospectus, the articles of association, the annual and semi-annual reports and the Key Investor Information documents. The Manager may terminate marketing arrangements. Information on sustainability-related aspects are available from jupiteram.com.

 

Austria: Erste Bank der oesterreichischen Sparkassen AG (Austrian Facilities Agent), Am Belvedere 1, 1100 Vienna, Austria.

 

France: BNP Paribas Securities Services, Les Grands Moulins de Pantin, 9 rue du Debarcadère 93500 Pantin, France.

 

Germany: GerFIS – German Fund Information Service UG (Haftungsbeschränkt), Zum Eichhagen 4, 21382 Brietlingen, Germany.

 

Hong Kong: Jupiter Asset Management (Hong Kong) Limited, Suite 1706, Alexandra House, 18, Chater Road, Central, Hong Kong.

 

Italy: Allfunds Bank S.A.U., Milan Branch, Via Bocchetto, 6, 20123 Milano, Italia; Societe Generale Securities Services S.p.A, Via Benigno Crespi 19A – MAC2, Milan. The sub-fund has been registered with the Commissione Nazionale per le Società e la Borsa (CONSOB) for the offer in Italy to retail investors.

 

Luxembourg: BNP Paribas Securities Services, Luxembourg Branch, 60, avenue J-F Kennedy L-1855 Luxembourg Grand-Duchy of Luxembourg.

 

Spain: Allfunds Bank, C/ La Estafeta 6, Edificio 3, 28109 Alcobendas, Madrid, Spain. For the purposes of distribution in Spain, the Company is registered with the Spanish Securities Markets Commission – Comisión Nacional del Mercado de Valores (“CNMV”) under registration number 301, where complete information, including a copy of the marketing memorandum, is available from the Company authorised distributors. Subscriptions should be made through a locally authorised distributor. The net asset value is available on www.jupiteram.com.

 

Sweden: Skandinaviska Enskilda Banken AB (“SEB”), Kungsträdgårdsgatan 8, SE-106 40, Stockholm, Sweden.

 

Switzerland: Copies of the Memorandum and Articles of Association, the Prospectus, KIIDs and the annual and semi-annual reports of the Company may be obtained free of charge from the Swiss representative First Independent Fund Services Ltd., Klausstrasse 33, CH-8008 Zurich. BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, CH-8002 Zurich is the Swiss paying agent.

 

Taiwan: Capital Gateway Securities Investment Consulting Enterprise, 9F/9F-1, No. 171, Songde Road, Xinyi District, Taipei City, Taiwan, R.O.C.

 

United Kingdom: Jupiter Investment Management Limited (UK Facilities Agent), The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ, United Kingdom. The Fund is recognised by the FCA.

 

Issued by Jupiter Asset Management (Europe) Limited (JAMEL, the Manager), The Wilde-Suite G01, The Wilde, 53 Merrion Square South, Dublin 2, D02 PR63, Ireland which is registered in Ireland (company number: 536049) and authorised and regulated by the Central Bank of Ireland (number: C181816).
No part of this document may be reproduced in any manner without the prior permission of JAMEL. 

Argentina

Legal Notice for Residents in the Republic of Argentina
This document includes a private invitation to invest in securities. It is addressed only to you on an individual, exclusive, and confidential basis, and its unauthorised copying, disclosure, or transfer by any means whatsoever is absolutely and strictly forbidden. Jupiter Asset Management Limited will not provide copies of this document, or provide any kind of advice or clarification, or accept any offer or commitment to purchase the securities herein referred to from persons other than the intended recipient. The offer herein contained is not a public offering, and as such it is not and will not be registered with, or authorised by, the applicable enforcement authority. The information contained herein has been compiled by Jupiter Asset Management Limited, who assumes the sole responsibility for the accuracy of the data herein disclosed.”

 

Brazil

Legal Notice for Residents in Brazil
The Funds may not be offered or sold to the public in Brazil. Accordingly, the Funds have not been and will not be registered with the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários, the “CVM”), nor have been submitted to the foregoing agency for approval. Documents relating to the Funds, as well as the information contained therein, may not be supplied to the public in Brazil, as the offering is not a public offering of Funds in Brazil, nor used in connection with any offer for subscription or sale of Funds to the public in Brazil.

 

Chile

Legal Notice for Residents of Chile
This private offer commences on the date as stated in the title and it avails itself of the General Regulation No. 336 of the Superintendence of Securities and Insurances (currently the Financial Markets Commission). This offer relates to securities not registered with the Securities Registry or the Registry of Foreign Securities of the Financial Markets Commission, and therefore such securities are not subject to oversight by the latter; Being unregistered securities, there is no obligation on the issuer to provide public information in Chile regarding such securities; and These securities may not be subject to a public offer until they are registered in the corresponding Securities Registry.


Mexico

Legal Notice for Residents of Mexico
The securities have not been and will not be registered with the National Registry of Securities, maintained by the Mexican National Banking and Securities Commission and, as a result, may not be offered or sold publicly in Mexico. The fund and any underwriter or purchaser may offer and sell the securities in Mexico on a private placement basis to Institutional and Accredited Investors pursuant to Article 8 of the Mexican Securities Market Law.

 

Paraguay

Legal Notice for Residents of Paraguay
The Shares have not been registered with the Commision Nacional de Valores of Paraguay (CNV), neither with the Stock Exchange of Asuncion (BVPASA) and are being placed by means of a private offer. CNV nor BVPASA has not reviewed the information provided to the investor. This document is only for the exclusive use of specific investor in Paraguay and is not for public distribution.

 

Peru

Legal Notice for Residents of Peru
The funds have not been registered before the Superintendenciadel Mercado de Valores(SMV) and are being placed by means of a private offer. SMV has not reviewed the information provided to the investor. This document is only for the exclusive use of institutional investors in Peru and is not for public distribution.

 

Uruguay

Legal Notice for Residents of Uruguay
The sale of the securities qualifies as a private placement pursuant to section 2 of Uruguayan law 18,627. The securities must not be offered or sold to the public in Uruguay, except in circumstances which do not constitute a public offering or distribution under Uruguayan laws and regulations. The securities are not and will not be registered with the Financial Services Superintendency of the Central Bank of Uruguay. The securities correspond to investment funds that are not investment funds regulated by Uruguayan law 16,774 dated September 27, 1996, as amended.

 

US Offshore

The Jupiter Gold & Silver Fund has not been registered under the United States Investment Company Act of 1940, as amended, nor the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any US Person, unless the securities are registered under the Act, or an exemption from the registration requirements of the Act is available. A US Person is defined as (a) any individual who is a citizen or resident of the United States for federal income tax purposes; (b) a corporation, partnership or other entity created or organized under the laws of or existing in the United States; (c) an estate or trust the income of which is subject to United States federal income tax regardless of whether such income is effectively connected with a United States trade or business.