Gold Pulls Back on US Rate Hike Concerns – Are Gold Miners Oversold?


ES Baker Steel Gold and Precious Metals Fund B Class Factsheets June 2021

The Fund fell -13.6% during the month (B Class), compared with the EMIX Global Mining Gold Index which fell -11.2% (in Sterling terms).

The precious metals sector pulled back during the month in the face of rising US yields. We believe this sell-off, which was sparked by investors’ concerns over future nominal interest rate hikes in response to the strong US economic recovery from COVID-19, will prove temporary and, at the time of writing, recovery is already underway. Ultimately speculation over Fed policy does not change the medium- to long-term positive outlook for gold, which remains supported by money printing, monetary debasement, higher debt levels and low/negative real (not nominal) interest rates. Should higher inflation rates prove persistent, gold will likely be an effective inflation hedge, particularly as the Fed’s scope to raise interest rates is likely to be limited.


The Fund has lagged its Index slightly in recent months, primarily due to its higher weighting to silver producers, which were impacted by weaker investor sentiment towards silver. As value investors, the Fund’s exposure to silver has so far remained sizeable during 2021 due to the level of undervaluation and growth we see in silver miners, and we stand by this conviction. We also believe silver is well-supported with a strong outlook both as a green energy material and a precious metal, indicating significant upside potential for silver producers ahead.


With no change to the positive outlook for the precious metals sector, our investment approach continues to be value-driven and focused on those companies with the best assets, effective management, attractive shareholder returns and that operate in an ethical and sustainable manner in line with our own ESG principles. We continue to see historic levels of fundamental undervaluation in precious metals equities and our team has taken advantage of the recent pullback to rebalance between individual stocks to ensure the Fund is well-positioned to benefit from the sector’s recovery.



Following the recent re-launch of the ES Baker Steel Gold & Precious Metals Fund we are pleased to offer seeding “S Class” shares to early investors. The “S Class” shares, which will be open for a limited time only, have a preferential low management fee of just 0.5%, with no performance fee. Please contact Baker Steel’s team for details.

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