Nigeria’s New Gold ETF Returns 16.27% in Q1 2016

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Wednesday, April 20, 2016 7:00am / Uchey Ndimele, CAIA, PRM, CPA

New Gold ETF bounced back from a YTD loss of 3.59% last year to end the first quarter of 2016 with a whopping 16.27% gain, according to analysis by fund data merchants, Quantitative Financial Analytics. The ETF which tracks gold performance, recorded impressive gains in January (5.05%) and February (9.38%); and a modest gain of 1.19% in March 2016. Comparatively, Gold spot gained 16.06% within the same period, gaining 5.74% in January, 9.85% in February and losing .08% in March. With that performance, New Gold ETF recorded an out performance of 0.21% over its bench mark index, gold. The ETF also out performed Gold in 2015 when it recorded -10.51% against -3.59% by the ETF.

Source: Quantitative Financial Analytics

Since 2012 when Quantitative Financial Analytics began to track the performance of the New Gold ETF and other mutual funds, the gold Etf has only underperformed Gold once, in 2012 when it gained 4.54% compared with a gain of 5.68% made by Gold in that year.  Though the ETF made a massive loss of 26.26% in 2013, it did better than the 27.79% loss recorded by Gold.

Source: Quantitative Financial Analytics


Except for 2013 and 2014 when the ETF’s return diverged remarkably from Gold’s return performance, the New Gold ETF has been tracking its underlining index (Gold) relatively close with minimal tracking error.

Global Outlook for Gold:


Globally, gold posted the biggest first-quarter gain in three decades arising from increased market uncertainties from the tensions in the middle east, the expectation of rate hike in the US as well as the prolonged bearishness of the market. Gold prices also got a boost from the adoption of negative interest rate by some countries like Japan, Sweden, Switzerland, and Denmark. Granting that past performance is not a guarantee for future performance, it remains to be seen if Gold would sustain the momentum in the second and later quarters of the year.


Tread with Caution:


As can be seen from the monthly return table, most of the gains were made in the first six weeks of the year and when compared to the later part of the quarter, it could mean that the momentum of increase could be slowing down. Therefore, investors should tread with caution. It does look however that most of the variables that led to the increase in the price of gold over the review period, remain. From the body language of the US Fed, interest rates would remain low for some time. This could undermine the recovery expectations in the US and therefore propel the price of gold. Though Japan has suffered two major earth quakes in quick succession, it remains to be seen if that will stem the continued rise in the Japanese currency which has shaken investors’ hope in central banks’ ability to boost growth across the world. Like in Nigeria, Q1 earnings results are being released across the globe and if such data signal strong gains by companies, especially in the US, the Fed may be more disposed to increasing interest rate which will dampen the appeal for Gold as financial instrument. If that happens, the price of gold and derivatively, that of gold ETF may begin to head south. Consequently, investors may wish to be cautious in their quest for gains through gold or its ETF.


About NewGold ETF


The NewGold ETF is a “derivative instrument” issued by the NewGold Issuer, a South African Company. The ETF is designed to track the spot gold price less fees and provides investors the opportunity of investing in the gold bullion market without the necessity of taking physical delivery of gold and sparing them the storage cost and other risks that go with possession of physical gold.

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