Is It Time To Rethink The 60/40 Portfolio?

by Frank Holmes of U.S. Global Investors, 1/6/23

Investors who use a 60/40 portfolio had a rough year. In the past, putting 60% in stocks and 40% in bonds has often helped investors hedge against losses in either asset class. But 2022 had other ideas.

Below is a scatter plot of returns for the S&P 500 (the x-axis) and the Bloomberg U.S. Aggregate Bond Index (y-axis), which tracks a basket of government and corporate debt as well as mortgage-backed securities. In 45 years of data, 2022 ranks as one of the worst years for stocks and the absolute worst year for bonds. Treasuries had their losingest year ever.

What does this mean for the 60/40 portfolio? This new year, should investors continue to rebalance to reflect 60% stocks and 40% bonds, or is the model broken?

To answer that, it’s important to remember above all else that 60/40 is primarily for long-term investors. There may be hiccups—2002, 2008 and now 2022—but over the long run, these tend to be smoothed out by the better-performing years.

Between 1977 and 2021, the 60/40 mix resulted in an attractive annual equivalent rate (AER) of 11.86% for stocks and 6.92% for bonds, according to Bloomberg data. If we include 2022 in the mix, the AER falls slightly to 11.10% for stocks, 6.45% for bonds.

So going forward, I think 60/40 can still work for many investors who have a long enough timeline and can stomach occasional drops and unexpected swings.

The 10% Golden Rule

Of course, there are many more asset classes to invest in besides stocks and bonds. That includes gold, which I’ve always recommended investors have 10% of their portfolio in—5% in physical bullion, the other 5% in high-quality gold mining stocks, mutual funds and ETFs. I call this the 10% Golden Rule.

In 2022, gold was one of the best assets to have exposure to. The yellow metal was essentially flat for the year, down a negligible 0.28%. That’s despite the U.S. dollar strengthening to its highest level in 20 years.

That’s also despite rising bond yields, not just here in the U.S. but across the globe. Remember when the amount of negative-yielding government bonds around the world was $10 trillion, $15 trillion, $18 trillion? That was only two to three years ago.

Today, the amount of government debt that trades with a negative yield has officially dropped to $0.

You would think that in this environment, the gold price would suffer. After all, the precious metal generates no income. And yet, gold has remained incredibly resilient, as you can see below.

I believe gold will continue to perform comparatively well in 2023, especially if we see the Federal Reserve change course. That looks less and less likely, though, as the jobs market in the U.S. remains surprisingly strong. With today’s Bureau of Labor Statistics (BLS) report, December marks the sixth straight month that the number of new jobs created exceeded 264,000.

Hong Kong’s Cathay Pacific is trailing its peers, but I believe there could be a reversal of fortune as the carrier is currently adding more flights and destinations for its customers. It’s also recently brought back its first-class service on certain popular routes for the first time in three years, which sounds like a good reason to celebrate.

Index Summary

The major market indices finished up this week. The Dow Jones Industrial Average gained 1.46%. The S&P 500 Stock Index rose 1.45%, while the Nasdaq Composite climbed 0.98%. The Russell 2000 small capitalization index gained 1.79% this week.
The Hang Seng Composite gained 6.12% this week; while Taiwan was up 1.67% and the KOSPI rose 2.41%.
The 10-year Treasury bond yield fell 30 basis points to 3.566%.

Airlines And Shipping

Strengths

The best performing airline stock for the week was Mesa Air, up 42.2%. Mesa Airlines surged ahead of, and following its, fourth quarter 2022 earnings release, including the firming of revised agreements with United creditors that provides sufficient liquidity until earnings can recover. However, this is not inconsistent with the prior view that considered bankruptcy as lower risk despite the filing delay and announcement of plans to wind down the American Airlines relationship.

MSC has delayed some of its ultra-large container vessels with the first of its new vessels (MSC Tessa) expected to only enter service in February 2023. As delivery dates are mutable and liners typically enjoy the upper hand versus shipyards, delivery slippages could outpace overall capacity growth, catering to current market dynamics. Worth noting, Drewry is forecasting that only 60% of capacity scheduled to be delivered in 2023 will eventually occur during the year.
Ryanair upgraded its fiscal year 2023 guidance based on stronger-than-anticipated profit after tax. The new guidance is 13% above consensus net income of €1.22bn for fiscal year 2023. The company assumes the fourth quarter to be loss-making and notes a recent softening in U.K. and Ireland traffic and pricing.

Weaknesses

The worst performing airline stock for the week was Cathay Pacific, down 2.8%. GOL Linhas Aereas reported December traffic figures, with total ASK (available seats per kilometer) up 21% year-over-year, down 11.5% versus 2019, while RPK (revenue passenger kilometers) was up 15% year-over-year, down 15.9% versus 2019, yielding a load factor of 77.9%.
The Evercore ISI Shipping Companies Survey moved down from 76.8 to 71.3, as moderation in spot tanker rates weighed on the index, moving it off its highest level since 2005.
In December, airline stocks declined 12.3% and underperformed the S&P 500 by 6.4%. In 2022, airlines underperformed the S&P 500 in seven out of the 12 months and the Dow Jones U.S. Airlines Index (DJUSAR) declined 21.8% on the year compared to the S&P 500 down 19.4%.

Opportunities

U.S. airlines’ trailing seven-day website visits stepped up this week by 43% year-over-year. All airlines saw visitation improve on an absolute and year-over-year basis which is likely a result of the widespread cancellations around the holidays. Southwest Airlines took the biggest step up to +99% year-over-year, with the trailing seven-day absolute visitation increasing over 60% from the prior week.
MSC took over the position as the world’s largest container liner, and the carrier has been manifesting the leading spot ever since. MSC’s fleet grew by 321,500 teu in 2022, equivalent to approximately 7.5%, writes Alphaliner, in an overview of box carrier fleet growth last year. However, MSC only brought in 83,600 teu from newbuilds, with the rest coming from second-hand vessels acquired throughout the year.
Chinese domestic air travel rebounded to 47% of normal levels in second half of December with yields 16% above normal. There may be scope for a further recovery into the Chinese holidays with government restrictions effectively lifted on domestic travel. The Australian traffic recovery has stalled as airlines prioritize yields and operational performance, while Hong Kong and Taiwan traffic is rebounding on border opening.

Threats

There is likely downside risk to Southwest’s aggressive 15% year-over-year 2023 ASM plan, which is back-half weighted. Much of this capacity growth is related to restoring the network, with the improved market depth likely supporting better irregular operations recoverability.
Analysts are bearish on marine transportation from a top-down perspective due to declines in cargo volume. This is due to, 1) container transport supply/demand conditions normalizing and the decline in transportation rates halting due to reduction and loss of services throughout the containership industry, and 2) new medium-term plans and strengthening of shareholder returns at Nippon Yusen and Mitsui O.S.K. Lines. However, the outlook is not good for the slack season during February–March.
Raymond James’ concerns about Mesa remains the shrinking of the regional airline opportunity in the U.S. as a result of the doubling of regional pilot wages and, thus, uncertainty about the normalized earnings potential. The group is assuming a halving of the pre-pandemic earnings power as the pilot supply situation normalizes, with upside if United decides to reallocate flying to Mesa from other partners (given the 10% stake and downside risk if the attrition reprieve is short-lived), as ULCCs start raising pilot wages.

Emerging Markets

Strengths

The best performing country in emerging Europe for the week was Poland, gaining 4.0%. The best performing country in Asia this week was Hong Kong, gaining 6.0%.
The Russian ruble was the best performing currency in emerging Europe this week, gaining 1.9%. The Thailand baht was the best performing currency in Asia this week, gaining 2.7%.
Technology stocks trading on the Hong Kong Exchange outperformed this week. China allowed Alibaba’s finance affiliate, Ant Group, to raise $1.5 billion for its consumer finance unit two years after the government called off a planned IPO and ordered the firm to restructure. In addition, China continues to reopen its market despite Covid infections rising.

Weaknesses

The worst performing country in emerging Europe for the week was Turkey, losing 3.0%. The worst performing country in Asia this week was Indonesia, losing 2.3%.
The Polish zloty was the worst performing currency in emerging Europe this week, losing 1.3%. The Indonesia rupee was the worst performing currency in Asia this week, losing 0.2%.
China’s Manufacturing and Service PMIs declined further in December. The manufacturing index dropped to 47.0 from 48.0 in November. The service index recorded an even sharper correction, dropping to 41.6 from 46.7 in the prior month.

Opportunities

Hong Kong will open its border with mainland China on Sunday. Up to 60,000 travelers from Hong Kong will be allowed to cross into mainland China daily, Chief Executive John Lee announced on Thursday. A negative test result within 48 hours before departure is needed with online registration required. It is estimated that as many as 50,000 people could travel through the land border and another 10,000 by ferry or air.
China’s new Foreign Minister, Qin Gang, said that he wants to improve bilateral ties with the United States. He was appointed on December 30 as Foreign Minister in replacement of Wang Yi, who had held the position since 2013 and was moved to the Political Bureau of the Communist Party.
The Eurozone reported lower inflation this week. The consumer price index (CPI) dropped to 9.2% in December from 10.1% in November, below the expected reading of 9.5%. The biggest country in central emerging Europe, Poland, reported a drop in inflation as well. CPI declined to 16.6% in December from 17.5% in November. While the cost of living is still high, the slowdown is a sign that the worst might be over.

Threats

Political tensions are rising in Turkey before scheduled presidential elections in June. Turkey’s top court froze funding for a leading pro-Kurdish party and is considering a ban of the party, which is currently the third largest in the parliament, aiming to challenge President Recep Tayyip Erdogan in the upcoming election. The People’s Democratic Party (HDP) became a significant political opponent in 2015, when the party won 80 seats in the parliament, temporarily preventing Erdogan’s AK Party from securing majority. Trading on the Istanbul Stock Exchange was halted twice on Thursday as equites dipped.
Russia is tying its relationship with Iran. Russian and Iranian space corporations have signed memorandums on provisions of launch services. In December, the Iranian Minister of Information and Communications Technology Issa Zarepour said that the country would put into orbit at least two domestically produced satellites, Nahid-1 and Nahid-2, by the spring of 2023. Nahid-2 is considered an important advancement in Iran’s orbital spacecraft production. Until the Ukraine war, Iran was the most sanctioned country in the world, according to Castellum.Ai, which tracks sanctions. Russia now holds that record.
Orthodox Christians will celebrate Christmas on January 7, and Russian President Putin ordered a 36-hour cease-fire. Hopefully, both sides will respect the few hours of peace, but shortly after the Christmas celebrations are over, Russia will likely continue its aggression. Ukraine and Russia for years have been celebrating Christmas on the same day, January 7, but not this year. Ukraine declared Christmas to be celebrated December 25 to disassociate itself from Russia and Patriarch Kirill.

Energy And Natural Resources

Strengths

The best performing commodity for the week was uranium, up 5.16%, as proxied by the Sprott Physical Uranium Trust. CoverDyn, the marketing arm of conversion services from Honeywell International’s Metropolis Works plant in Illinois, was awarded $14 million from the U.S. Department of Energy (DOE). This comes from its $75 million program to create a domestic uranium reserve to boost energy security. Five domestic uranium suppliers have announced supply contracts for over 800,000 pounds of U₃O₈ to the DOE.
The U.S. tied Qatar as the world’s top exporter of liquefied natural gas last year, writes Bloomberg, a milestone for the meteoric rise of America as a major supplier of the fuel. Both countries exported 81.2 million tons in 2022, according to ship-tracking data compiled by Bloomberg. While that’s a modest increase for Qatar, it marks a huge leap for the U.S., which only began exporting LNG from the lower-48 states in 2016 and has seemingly overnight become a dominant force in the industry.
The offshore recovery is progressing and the setup into fiscal year 2023 remains supportive of continued contracting term strength. Day-rate strength has been most notable for benign floating rigs, but demand has been broad based; cumulative rig years added thus far in 2022 for both jackup and floating rigs have been the highest in the last seven years.

Weaknesses

The worst performing commodity for the week was natural gas, dropping 16.51%. With natural gas prices down 40% over the last three weeks, U.S. shale executives remain concerned about the outlook for rising costs going into 2023, writes Bloomberg, as they continue to struggle with hiring and retaining workers, according to the Federal Reserve Bank of Dallas. Most respondents polled in the bank’s latest quarterly energy survey, which was released Thursday, said they expect to increase capital spending slightly or significantly next year compared with 2022 levels.
According to UBS, European aluminum cuts have amounted to 1,200 tons, while another 800-900 tons are at risk at a $3,000 per ton cost base. But China’s production run-rate has risen from 38 million tons to 41 million tons, offsetting disruptions in Europe. Importantly, despite third party estimates suggesting 30-50% of Chinese smelters are losing money, their on-the-ground channel-checks suggest output will be stickier than expected.
With the recent weakness in natural gas prices, the lower 48 gas production was down 10.4% this past week to just 88.8 Bcf/day versus 99.2 Bcf/day last week. Freeport’s LNG export terminal is now likely to be down for several more months, further constraining access to international prices for domestic producers of natural gas.

Opportunities

Iron ore prices have lifted to $118 per ton, supported by China’s rapid re-opening and the weaker U.S. dollar. Demand signals generally remain weak, with China’s pig iron production again falling week-over-week in mid-December and China rebar prices/ spreads still depressed; iron ore port inventories have fallen 4 million tons since the end of November with mills restocking, while steel inventories at mills remain high.

Norway’s Blastr Green Steel is planning a $4.3 billion investment to construct a low-carbon steel factory in Finland. This could be one of the largest industrial projects to be built in Norway, as reported by Bloomberg. Steelmaking is highly pollution intensive with blast furnaces heating iron ore and coking coal. Blastr’s plant will have a fully integrated hydrogen production facility powered by abundant wind supplies in the Nordic region. Sweden’s SSAB AB and Finland’s Outokumpu Oyj are also exploring green steel, but it’s not produced on an industrial scale yet.
Bloomberg reported three leading Chinese solar-panel makers are ramping up production in a boon to clean energy. Solar demand has been growing but production was hamstrung in 2021 and 2022 due to a spike up in polysilicon prices during the pandemic. Polysilicon prices have collapsed 50% from last year’s high which should expand their margins, giving producers an incentive to boost profits now. Silver demand could pick up with increased solar panel production.

Threats

Lithium’s going to get less expensive in 2023, according to a Chinese supplier of the battery metal, potentially offering some relief to electric-vehicle makers squeezed by soaring costs, writes the Financial Post. Prices have already softened after a spectacular two-year rally labeled “insane” by Elon Musk and “unreasonable” by China’s BYD Co. The cool-off is poised to continue as more supply emerges to trim abnormally high margins for lithium producers, Wang Pingwei, chairman of Sinomine Resource Group Co., said in an interview.
Oil prices started the year with more than an 8% slide showing that future demand uncertainty is significant as the maker ponders a recession for 2023. The December reading for the index of services released by the Institute for Supply Management (ISM) showed its largest drop since the immediate aftermath of the pandemic. ISM’s gauge of manufacturing showed a second consecutive monthly drop in December too, further depressing the outlook.
UBS maintains a neutral and cautious view on America’s aluminum producers, as it assesses raw materials cost lags will continue to pressure margins through the first half of the year. Namely higher caustic soda and carbon prices, which typically flow through inventories with a one to five-month lag. Specifically, the UBS chemicals team estimates U.S. caustic soda prices will remain elevated through the first quarter, as caustic soda supply (a by-product of PVC) remains under pressure on account of the U.S. residential construction slowdown.

Luxury Goods

Strengths

Hermes, well known for its luxury handbags and other leather goods, despite already having prices above the industry average, was able to raise prices across the board (all product categories) globally during the holidays. The company raised prices in China during Christmas and in Europe and the United Kingdom on the first of the new year.

MGM China Holdings, a Macau casino and hotel operator, was the best performing S&P Global Luxury stock for the week, gaining 18.3%. Macau stocks continue to surge as China reopens its economy after almost three years of Covid restrictions.

Weaknesses

Retail sales in Hong Kong dropped 4.2% year-over-year in November. Most Bloomberg economists were predicting an increase of 4.8%. Strict Covid restrictions have weighed on Hong Kong’s economy since early 2020.
Sales of luxury homes in China fell 40% year-over-year in 2022, Yicai Global reported on Thursday. Around 422 new upmarket houses, worth more than 150,000 yuan per square meter, were sold (representing a 19% drop). Pre-owned luxury homes costing over 150,000 yuan per square meter slipped 52%, with the sales of those at above 10 million yuan falling to 2017 levels.
Tesla was the worst performing S&P Global Luxury stock for the week, losing 8.1%. Shares continued to sell off this week after the company announced weaker-than-expected sales in the fourth quarter and cut car prices in China.

Opportunities

Morgan Stanley’s research teams estimate that Korean nationals are now the world’s biggest spenders per capita on personal luxury goods. Overall, in 2022, the total personal luxury goods spending by South Koreans should have grown by 24%, reaching $16.8 billion, making the Korean market one of the fastest growing since the start of the pandemic. Morgan Stanley sees Richemont and Louis Vuitton as key beneficiaries from strong demand in Asia.
Barclays believes that the luxury sector should experience some slowing, but not a sharp drop in demand, forecasting revenue growth of 9% this year. The broker has a positive view on the European luxury goods market and points out Cartier-owner Richemont as a preferred name within the luxury space. Richemont’s exposure to watches and the jewelry segment provides an asset class that holds value during periods of rising inflation.
This Saturday, Hong Kong will start allowing visitors to travel to China’s mainland. Only 60,000 visitors will be allowed to cross the border for now, but Bloomberg estimates that this year’s border reopening will allow Hong Kong retail sales to rise 18% year-over-year in 2023, possibly hitting 95% of pre-pandemic levels, as 27 million visitors from mainland China travel to the city in the next 12 months. Due to Covid restrictions, in the past two years, the number of Chinese tourists visiting Hong Kong have dropped below 500,000.

Threats

Tesla’s Chinese competitor, BYD, unveiled two new electric vehicle (EV) cars during a press conference on Thursday. The U8 sport utility car would be at the “million yuan” level, making it one of the most expensive EVs on the road in China, according to Bloomberg. Tesla’s model Y SUV has a much lower base price. In addition, BYD announced a luxury electric sport sedan, the U9. BYD shares gained 5% this week after dropping 28% in 2022.
Tesla cut car prices in China again, deepening the cuts from October of last year. The starting price for Tesla’s locally built Model Y sport utility car dropped to a new low of 259,000 yuan ($37,875), according to the company’s Chinese website, which is 43% less than the base model available in the United States. Tesla also lowered the price of the Model 3 by 14% to 229,900 yuan, about 30% cheaper than in the U.S.
The Bank of America research team says the consumer recovery in China will be bumpy, as the population of 1.4 billion people is facing a surge in Covid cases. They predict consumer spending to worsen in early 2023. The second half of the year should be stronger, supported by the government’s initiatives to spur consumption.

Blockchain And Digital Currencies

Strengths

Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Lido DAO, rising 51.77%.
BlackRock has given bankrupt bitcoin miner Core Scientific a new $17 million loan. BlackRock, which already was Core’s largest shareholder, previously held $37.9 million of the miner’s secured convertible notes. The latest $17 million is part of the new $75 million convertible notes, which are part of Core’s pre-arranged bankruptcy process, writes CoinDesk.
An investment firm tied to two of Singapore’s most well-known families is taking steps to bet on the future of digital assets, writes Bloomberg, despite the chill in the industry. Whampoa Group, a multi-family office anchored by principals from the Lee family that founded Oversea-Chinese Banking Corp and Amy Lee (the niece of the city-state’s founding prime minister), aims to deploy about $100 million in Web3 start-ups, through a new venture investment arm, the article continues.

Weaknesses

Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was Huobi Token, down 9.97%.
The U.S. SEC is pushing back on Binance.US’s plan to buy bankrupt crypto lender Voyager Digital in a deal valued at about $1 billion, according to a bankruptcy court filing. The SEC has communicated the concerns to Voyager’s lawyers and has been advised that revised documents will be filed, according to the objection. The agency added that it reserves the right to amend its objection later, writes Bloomberg.
Silvergate Capital slumped in early trading after the bank said it sold assets at a steep loss and fired 40% of its staff. Customers withdrew about $8.1 billion of digital asset deposits from the bank during the fourth quarter, which forced it to sell assets at a loss of $718 million, writes Bloomberg.

Opportunities

Animoca Brands is looking to raise about $1 billion this quarter for its new Web3 metaverse investment fund, sharply scaling back its ambitions during the current crypto industry meltdown. Animoca Capital is in talks with potential investors and would use the money to support blockchain and metaverse startups, writes Bloomberg.
Singapore’s main crypto lobby group has pushed back on the central bank’s proposals to bar crypto firms from lending out retail customers’ digital tokens, saying such a measure is overly restrictive. The Blockchain association of Singapore said such a blanket ban could instead push people to seek out unregulated offshore firms to lend their tokens to writes Bloomberg.
During their first virtual meeting of the year, Ethereum developers said they are pushing ahead with a key software upgrade that would let people withdraw Ether tokens used to operate the blockchain network, writes Bloomberg.

Threats

DeFi users fell victim to a phishing attack and lost $3.4 million in gmx, the native token of decentralized trading protocol GMX, reports Bloomberg. The tokens were then sold on the open market. On-chain data shows that the attacker started taking out funds from the victim’s wallet at 7 pm UTC on January 3. The attacker sent out gmx worth about $3.4 million to another address and swapped them for ether, security analysts PeckShield estimated.
The top U.S. bank regulators issued a fresh warning to lenders about the risks associated with delving into crypto. The Fed, FDIC, and Office of the Comptroller of the Currency on Tuesday detailed concerns with the volatile asset class. Officials said in a statement that it was important that risks that can’t be controlled aren’t allowed to migrate to the banking system, writes Bloomberg.
Coinbase shares slumped as much as 6.8% in premarket trading Thursday after the cryptocurrency exchange was downgraded to market perform from outperform at Cowen. This says that retail trading volumes have yet to show signs of stabilizing, according to an article published by Bloomberg.

Gold Market

This week gold futures closed at $1,871.80, up $45.60 per ounce, or 2.50%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 9.36%. The S&P/TSX Venture Index came in up 2.04%. The U.S. Trade-Weighted Dollar rose 0.37%.

Strengths

The best performing precious metal for the week was gold, up 2.50%. Osisko Gold has amended the CSA stream agreement, effectively reducing the upfront payment for the silver stream to $75 million (previously $90 million). The company has also entered into a backstop financing agreement with Metals Acquisition Corp., providing up to $75 million in financing as an update to the previously announced copper stream option.
Artemis Gold updated the market on the timing of the BC Mines Act permits, indicating it expects to receive the permits this quarter. The BC Mines Act permits are the final permitting milestone for the project. Major construction is still planned for the end of the first quarter, and substantial pre-construction work is underway or already completed.
Skeena Resources Ltd. announced that it has closed a royalty sale with Franco-Nevada Corporation pursuant to which Skeena granted a 0.5% net smelter returns royalty on the Eskay Creek gold-silver Project to Franco-Nevada in exchange for a closing cash consideration of C$27 million and contingent cash consideration of C$1.5 million. As highlighted in the Company’s September 26, 2022, news release, Skeena repurchased this 0.5% NSR from Barrick Gold Corporation after it was initially granted in connection with the acquisition of Eskay Creek.

Weaknesses

The worst performing precious metal for the week was silver, down 0.21%. Despite positive news at the end of the week, Bloomberg reported three leading Chinese solar-panel makers are ramping up production in a boon to clean energy. Solar demand has been growing but production was hamstrung in 2021 and 2022 due to a spike up in polysilicon prices during the pandemic. Polysilicon prices have collapsed 50% from last year’s high which should expand their margins, giving producers an incentive to boost profits now. which should lead to increased silver demand.
Exchange-traded funds (ETFs) cut 38,791 troy ounces of gold from their holdings in the last trading session, bringing this year’s net sales to 3.77 million ounces, according to data compiled by Bloomberg. The sales were equivalent to $70.4 million at the previous spot price.
Fortuna Silver Mines was down after the company on Thursday called a decision by Mexico’s Secretary of Environment and Natural Resources to re-assess a 12-year extension of the environmental impact authorization for its San Jose mine in the country “incomprehensible,” as it plans to challenge the ruling.

Opportunities

MAG Silver reports that it has received confirmation from Fresnillo, the operator of the Juanicipio Project, that final testing of the downstream power distribution and control systems at the project is now complete. The entire system has now been energized and commissioning of the project has formally begun. Fresnillo’s objective is to reach full nameplate capacity in the second quarter of this year. Once commissioning is concluded, higher grade mineralized material will be processed at the Juanicipio plant and could also continue to be processed at the nearby Saucito and Fresnillo operations if required.
Trading in call contracts of VanEck Gold Miners ETF so far this year is the most active since March, reports Bloomberg, underscoring expectations the precious metal will continue to outpace resource assets. The fund, which has invested about $13 billion in a portfolio including Newmont Corp., Barrick Gold Corp. and Franco-Nevada Corp., has jumped 7% in 2023 bringing to 40% its gain since a low on September 26, the article continues.

New Found Gold Corp. said that it plans to expand its diamond
drill campaign at the Queensway project in Newfoundland and Labrador to
500,000 meters from 400,000 meters. The company said its expanded drill program is fully funded out of its current cash and marketable securities balance of $90 million.

Threats

The feasibility study update for Osisko has lowered the NAV estimate to C$88 million (from C$161 million previously). The lower NAV is due to lower grade (following the feasibility study grade 3.78g/t), and a 2024 startup, which is later than consensus.
Gold eased from a six-month high this week as Treasury yields rebounded following Federal Reserve minutes that indicated interest rates may stay high for a long time. In an unusually blunt warning to investors, central bank officials cautioned against underestimating their will to keep interest rates high. Yields on benchmark 10-year government bonds rose Thursday, following a run of declines that drove bullion to the highest since June this week.
The gold price ticked down from fresh six-month highs as the headline manufacturing index from the Institute for Supply Management disappointed expectations in December, contracting slightly more than expected. The ISM manufacturing index was at 48.4% last month versus the consensus forecast of 48.5%. The monthly figure also marked a 0.9 percentage-point increase from November’s reading of 49%.

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (12/30/22):

Skeena Resources

Franco-Nevada

Barrick Gold Corp

Fortuna Silver Mines

Osisko Gold Royalties

Alibaba Group Holding

American Airlines

United Airlines

Ryanair Holdings

Southwest Airlines

Burberry

Hermes

Richemont

Louis Vuitton

Cartier

Tesla

Air China Ltd.

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.

The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.

The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index.

The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.

The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

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