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Trading Precious metals on the JSE

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Brief introduction into trading precious metals on the JSE

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Trading Precious metals on the JSE

  1. 1. Ways of investing in metals 6th Oct 2014 Mark Weetman, Vunani Private Clients
  2. 2. 8486.48% gain in the last 82 years 02
  3. 3. Why Does Everyone Love Precious Metals (especially Gold)?  Gold has often been sought as a safe store of value  offer unique inflationary protection, they themselves cannot be inflated (i.e. you can't print more of them). When real rates of return in the equity, bond or listed property are negative, people regularly flock to gold as an asset that will maintain its value  Provide "upheaval insurance", whether financial/political/military - savings can be made portable and stored  Precious metals also provide low or negative correlation to other asset classes like shares and bonds - even a small percentage of precious metals in a portfolio will reduce both volatility and risk  Silver role as an industrial metal - electrical appliances, medical products, use in batteries, superconductor and microcircuit markets  Platinum demand - automotive catalysts, jewelry accounts, petroleum and chemical refining catalysts  “And it’s just so shiny!” Gary Booysen, Vunani Private Clients
  4. 4. Commodities = diversification Our typical risk profiles 5 – 8% allocation
  5. 5. What are my options? 1 3 4 2 5
  6. 6. IndexName IndexCode InstrumentName Main resource Weight Perc. AllShare Resource 10 J210 Anglo American Platinum & Iron Ore/Steel = weight 22.06 5.3 Resource 10 J210 Anglo American Platinum Platinum 1.55 0.37 Resource 10 J210 Anglogold Ashanti Gold 4.28 1.03 Resource 10 J210 African Rainbow Minerals Ltd Iron Ore/Steel 1.07 0.26 Resource 10 J210 Assore Ltd Iron Ore 0.65 0.16 Resource 10 J210 BHP Billiton Iron Ore/Petroleum 42.97 10.32 Resource 10 J210 Exxaro Resources Coal 1.15 0.28 Resource 10 J210 Gold Fields Gold 2.36 0.57 Resource 10 J210 Impala Platinum Hlds Platinum 2.9 0.7 Resource 10 J210 Sasol Oil 21 5.04 100 24.01 Trading equities?
  7. 7. Trade the derivative! The Major Miners: a) The Majors a) Gold Fields (GFI) b) Harmony (HAR) c) AngloGold (ANG) 7x Gearing 9x Gearing 6.5x Gearing
  8. 8. Trade the derivative! The Minor Miners: a) The Minors a) DRD Gold b) Village Main Reef c) Sibanye Based on Safex Margin only… Clearer will whack you extra! 5.14x Gearing 1.54x Gearing 7.19x Gearing
  9. 9. Valuing gold as a commodity: All-in costs include … Labour Energy Infrastructure G & A Operating capex Sustaining capex Expansion capex - new project outlay (replacing mined ounces) Exploration Royalty, licensing, taxation Financing and debt charges $1,100-1,400 generally accepted all-in cost Barrick $918/oz ($1-1,100 projected for 2013)
  10. 10. Valuing gold as a commodity: “At $1,650 the gold mining industry was struggling to make money. At $1,200 …” Gary Booysen, Vunani Private Clients
  11. 11. Should You Invest in Gold or Gold Stocks?
  12. 12. Exchange Traded Funds Name Description (what the ETF tracks) Website AfricaGold (ETFGLD) Gold bullion - each unit equals approximately 1/100th of a fine troy ounce of gold bullion in ZAR terms http://corporateandinvestment.standardbank.co.z a/cib/products AfricaPlatinum (ETFPLT) Platinum bullion - each unit equals approximately 1/100th of a fine troy ounce of platinum bullion in ZAR terms http://corporateandinvestment.standardbank.co.z a/cib/products AfricaPalladium (ETFPLD) Palladium bullion - each unit equals approximately 1/100th of a fine troy ounce of palladium bullion in ZAR terms http://corporateandinvestment.standardbank.co.z a/cib/products NewPalladium (NGPLD) Palladium bullion - each unit equals approximately 1/100th of a fine troy ounce of palladium bullion in ZAR terms www.etf.absacapital.com NewGold (GLD) Gold bullion - each unit equals approximately 1/100th of a fine troy ounce of gold bullion in ZAR terms www.etf.absacapital.com NewPlat (NGPLT) Platinum bullion - each unit equals approximately 1/100th of a fine troy ounce of platinum bullion in ZAR terms www.etf.absacapital.com Commodity ETFs
  13. 13. It’s a fund… with a fact sheet and everything! Gold Price: $1,314.35/oz Currency: 10.68 Rand Gold Price: R14,037.26 GLD trading at: R135.21 (last) Gold Price: 96.39% backed TER 0.4% $1,314.35 x USDZAR10.68 x1/100 x 0.9639 = Fair Value R135.30
  14. 14. Exchange Traded Notes Alpha Code List of Exchange Traded Notes Instrument Name Description Issuer Website COLRMB RMB COAL ETN Tracks the performance of the ICE, Richards Bay Coal future contract Rand Merchant Bank http://www.rmb.co.za/weTrade_ETN_Overview.asp GOLDEN IB GOLDEN ETN Tracks the US Dollar Price of Gold Investec Capital Markets http://www.investec.co.za/products-and-services/investing/Investec- Gold-ETN/the-investec-gold-etn.html NEWBCI NEWWAVE INDEXETN Tracks the Barclays Capital Commodity Index Pure Beta Total Return Index ABSA Capital http://etf.absacapital.com/PRODUCTS/EXCHANGETRADEDNOTE S/Pages/default.aspx NEWPLT NEWWAVE PLAT ETN Tracks the spot price performance of the underlying precious metal, Platinum. ABSA Capital http://etf.absacapital.com/PRODUCTS/EXCHANGETRADEDNOTE S/Pages/default.aspx NEWSLV NEWWAVE SLV ETN Tracks the spot price performance of the underlying precious metal, Silver. ABSA Capital http://etf.absacapital.com/PRODUCTS/EXCHANGETRADEDNOTE S/Pages/default.aspx OILRMB RMB OIL ETN Tracks the performance of the CME Crude Oil (WTI) future contract Rand Merchant Bank http://www.rmb.co.za/weTrade_ETN_Overview.asp SBACI SBA COMMODITY-INDEX ETN Tracks the performance of the Standard Bank Africa Commodity Index (SBAFCI) Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBACOP SB COPPER ETN Tracks the performance of the Copper COMEX future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBACRN SB CORN ETN Tracks the performance of the Corn-CBOT future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBAG1 GOLD COMMODITY-LINKER Tracks the performance of the NYMEX Gold future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBAOIL SB WTI OIL ETN Tracks the performance of the NYMEX OIL WTI future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBAPD1 PALADIUMCOMMODITY-LINKER Tracks the performance of the NYMEX Palladium future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBAPL1 PLATINUMCOMMODITY-LINKER Tracks the performance of the NYMEX Platinum future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBAS1 SILVER COMMODITY-LINKER Tracks the performance of the NYMEX Silver future contract Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp SBAWHT SB WHEAT ETN Tracks the performance of the Wheat CBOT future contracts Standard Bank http://corporateandinvestment.standardbank.co.za/sa/products/tradi ng_risk_mngt/exchange_traded_notes.jsp Commodity ETNs
  15. 15. JSE CFDS & SSFs Contract Code Contract Description Underlying Code Category EGLC CFD on ETFGLD ETFGLD Exchange Traded CFD EGLQ African Gold ETF ETFGLD Single Stock GLDC CFD on GLD GLD Exchange Traded CFD GLDQ New Gold Issuer Limited GLD Single Stock PLDC CFD on ETFPLD ETFPLD Exchange Traded CFD PLDQ African Paladium ETF ETFPLD Single Stock PLAC CFD on NGPLT NGPLT Exchange Traded CFD PLAQ Newgold Platinum ETF NGPLT Single Stock PLTC CFD on ETFPLT ETFPLT Exchange Traded CFD PLTQ African Platinum ETF ETFPLT Single Stock STRC CFD on STXRES STXRES Exchange Traded CFD STRQ Satrix RESI STXRES Single Stock
  16. 16. Trade the derivative! JSE Quanto’s R7400: 1310.6 – 1312.40 (Near) Gold R1,311.23 Currently R5,700 i.e. 21 x Near Far JSE Quanto’s Not equivalent to holding gold but gold price in rand! RMB is the Market Maker you will trade!
  17. 17. Gold (ZAR): The Technicals
  18. 18. Plat (ZAR): The Technicals
  19. 19. Thank you for attending: For more information: tradingdesk@vvuunnaanniipprriivvaatteecclliieennttss..ccoo..zzaa 001111 –– 338822 22992200//33//77 Follow @Vunani on Twitter trading tips, secrets and breaking news…

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