Timing plays a decisive role on the stock exchange. In this respect, the tracker certificate on the Leonteq Junior Gold Miners Quality & Momentum Index did not have a happy start. The structured product was launched at the end of August 2020. Shortly before, the gold price had reached an all-time high. A short time later, the precious metal turned downward. Successively rising interest rates and hopes of an end to the Corona pandemic put the brakes on the crisis currency. Consequently, the shares of the gold mining sector were also sidelined. The index, which contains 20 "juniors", i.e. relatively small sector representatives, was unable to escape the correction. But now the selection has come back together with the gold price. So far this year, the Leonteq Junior Gold Miners Quality & Momentum Index has gained almost one fifth. The benchmark was thus able to break out of the downward trend to the upside (see chart).
Once again, the most important precious metal is in demand as a crisis currency. When Russia invaded Ukraine at the end of February, the price rose sharply. In addition to geopolitics, inflation is also a factor in favor of gold. It is well known that inflation in many places is at historically high levels. While the U.S. Federal Reserve has already heralded the turnaround in interest rates against this backdrop, the ECB and SNB remained true to the expansionary course for the time being. Nevertheless, yields have also risen sharply in the EUR and CHF areas. Since gold itself does not yield any current income, this development actually speaks against the precious metal. Apparently, investors are currently giving higher weight to the attributes "inflation protection" and "crisis currency". This is supported not only by the price increase but also by the inflow of funds into physically backed investment products. According to figures from the World Gold Council (WGC), assets under management of global gold ETFs increased by USD 16.6 billion or close to 270 tons of the precious metal in the first quarter of 2022.
So the core product of companies included in the Leonteq Junior Gold Miners Quality & Momentum Index is more in demand than ever. This benchmark deliberately avoids sector heavyweights such as Barrick Gold or Newmont. Instead, the concept focuses on the special dynamics of small caps from this segment. At the same time, the selection process focuses not only on quantitative criteria but also on momentum and quality. For this purpose, the ratio of debt to market capitalization, among other things, is scrutinized. In addition, gross profit growth as well as normalized and trailing profit margins, i.e. those of the last four quarters, are included in the assessment. With regard to momentum, the expert panel responsible for the composition analyzes the share price development over one, two and three years. Once a year, the sophisticated process is completed and the index is adjusted if necessary. The 20 selected stocks are initially equally weighted.
More than half of the current index members come from Canada. This includes B2Gold. Operationally, the Vancouver-based mining group is internationally active with projects in Mali, the Philippines, Namibia and Colombia. B2Gold has just presented key operating data for the first quarter of 2022: Gold production totaled 209,365 ounces, 5% above budget. The company generated quarterly revenue of USD 360 million from the sale of 195,000 ounces of the yellow metal at an average price of USD 1,874 per ounce. Australian index members include Gold Road. The Perth-based mining company discovered the "Gruyere" deposit in the west of the continent in 2013. It is considered one of Australia's largest and lowest-cost mining sites. Production has been underway since 2019 as part of a joint venture with Gold Fields. Over a ten-year period, the partners aim to bring to the surface an average of 350,000 ounces per year. These two examples show that the members of the Leonteq Junior Gold Miners Quality & Momentum Index have the potential to benefit from a new "gold rush".
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