The Ukraine crisis and the recovery of the gold sector
The dramatic escalation of tensions between Russia and the West, as Russia begins its military operations in Ukraine, presents a range of implications for precious metals, as well as for broader commodity markets. Increased safe haven demand has sent the gold price to a 17-month high, while energy costs are rising sharply, amid broader supply chain issues for raw materials. The ES Baker Steel Gold & Precious Metals Fund is actively positioned to offer investors important diversification in troubling times, while managing portfolio risks in this volatile environment. Russian exposure (which is held via equities listed on established western exchanges only) had already been reduced recently, today representing c.1% of the Gold & Precious Metals strategy, and our team are monitoring the situation closely.
Aside from the Ukraine crisis, we are seeing positive signs for precious metals so far in February, after a challenging start to the year. We expect the headwinds for the gold sector to abate in the months ahead, particularly as we approach the start of the US rate hike cycle and as clarity grows over the limited scope for higher real rates. Overall, we see signs that the gold sector has bottomed and as such the Gold & Precious Metals Fund is positioned for the recovery of the gold sector.
You can read more about our views on the interplay between gold, inflation, interest rates and geopolitics here.