Seeking Free Cash Flow? Gold and Precious Metal Miners Have Got You Covered

Author: Frank Holmes
Date Posted: April 24, 2020 Read time: 54 min


By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

Frank Holmes on Bloomberg March 2020

Physical gold continued to catch a bid this week, trading above $1,760 an ounce, on a host of head-spinning economic news, from millions more Americans filing jobless claims to record money-printing to negative oil prices.

The national average price for a gallon of gasoline fell further to $1.78 on Friday, down more than $1 a gallon from a year ago. But the lowest price in the country may belong to a Shell station in Francis Creek, Wisconsin, which is reportedly selling (giving away?) gas for $0.75 per gallon, according to GasBuddy’s Patrick De Haan.

The seriousness of the coronavirus-fueled recession is reflected in April’s preliminary health reading of America’s manufacturing and service sector industries. The composite purchasing manager’s index (PMI) plunged to 27.4, a new series low, as companies were shuttered and millions of non-essential workers were furloughed or laid off. A staggering 26.4 million people, or about 15 percent of the U.S. workforce, have now lost their jobs since mid-March due to the Great Lockdown.

U.S. composite PMI hits a new record low in April
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“The scale of the fall in the PMI adds to signs that the second quarter will see an historically dramatic contraction of the economy, and will add to worries about the ultimate cost of the fight against the pandemic,” writes Chris Williamson, chief business economist at IHS Markit, which produces the monthly business survey.

Some U.S. states are slowly starting to reopen their economies, and I’m eager to see what effect this might have on May’s PMI. If it turns up, it could indicate the bottom is behind us. The most aggressive of any state right now appears to be Georgia, whose governor, Brian Kemp, has come under fire by even President Donald Trump for allowing high-risk businesses such as gyms and hair salons to open their doors to customers. The southern state processed more unemployment claims in the last week of March than it did in all of 2019, according to CityLab.

Fire Up the Money Printers…

Bloomberg reports that in the month of March, central banks in Group of Seven countries purchased some $1.4 trillion in financial assets in an effort to soften the blow of the pandemic. That’s nearly five times the previous monthly record set in April 2009, when the world was dealing with what was then the worst crisis since the Great Depression.

Meanwhile, world governments have unleashed a combined $8 trillion in fiscal stimulus, with more on the way. This week alone, the U.S. House of Representatives approved, and the president signed, an additional $464 billion in relief for small businesses that have been impacted by the economic downturn, as well as funding for hospitals and testing.

For fiscal year 2020, the federal budget deficit could hit an incredible $3.7 trillion, the Congressional Budget Office (CBO) said on Friday. That would be its largest size as a share of the U.S. economy since World War II.

Right now the U.S. is printing money on a scale we’ve never seen. The amount of M2 money supply—which includes cash and “near money” such as savings deposits, money market securities and mutual funds—has raced up 16 percent compared to the same time a year ago. That may not seem like much, until you put it in an historical context and see just how significant the ramp-up really is.

the U.S. is printing money like crazy
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Physical Gold Is Glittering, but Don’t Overlook Gold Mining Stocks

All of this is constructive for the price of gold, which I believe is on a path to exceed its previous record of $1,900 an ounce. Analysts at Bank of America now see the precious metal touching $3,000 within the next 18 months.

And if that happens, just wait and see what gold mining companies do.

Shares of senior producers, as measured by the FTSE Gold Mines Index, are up close to 20 percent for the year, but for the 10-year period they still trail the metal’s spot price performance. I believe this makes the group an attractive investment opportunity, especially now that gold mining is one of the few industries generating strong revenues and free cash flow on higher metal prices.

gold stocks are trading up but still underperforming the price of bullion
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Think about it: With more than 26 million people applying for unemployment benefits in the past month and a half, many S&P 500 stocks’ revenue will dry up. Gold stocks should shine, by comparison, and I predict we’ll see new buyers who focus on companies with free cash flow, one of the best metrics of profitability.

Take a look below. What you see are the most profitable precious metal mining stocks with a market cap of $1 billion or more, based on free cash flow yield (FCFY). This is a metric that basically tells you how much cash the business is generating after taxes relative to how much it costs to operate. The lower the number, the less cash it’s making. The higher the number, the more cash it’s making.

Included in this list are highly liquid, mega-cap producers like Barrick (3.9 percent FCFY) and Newmont (also 3.9 percent), smaller firms such as the Russian Highland Gold Mining (5.4 percent) and everything in between. One royalty company, Wheaton Precious Metals (3.8 percent), is also represented.

Topping the list is intermediate miner Alacer Gold, which released positive initial drill results this week at its Copper Hill project in Turkey. The Denver-based producer reported “impressive grades” at the site, with the copper close to the surface and “very low” in contaminates.

gold producers seeing strong profits on higher metal prices
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Something I ought to point out is that the data above is as of December 31, as companies have not yet reported for the first quarter of 2020. For comparison’s sake, the S&P 500’s average FCFY for the same period was 5.6 percent. Even before the market tanked and gold began to surge, a few of the metal producers were already outperforming S&P 500 stocks in cash generation.

Keep your eyes on mining stock earnings in the coming days and weeks. Time will tell, but I expect to see that many generated healthy levels of free cash flow in the March quarter, which should help attract investors who up until this point may have been sitting on the sidelines.

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Gold Market

This week spot gold closed at $1,729.60, up $46.78 per ounce, or 2.78 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 12.10 percent. The S&P/TSX Venture Index came in up just 3.99 percent. The U.S. Trade-Weighted Dollar rose 0.45 percent.

Date Event Survey Actual Prior
Apr-21 Germany ZEW Survey Expectations -42.0 28.2 -49.5
Apr-21 Germany ZEW Current Situation -77.5 -91.5 -43.1
Apr-23 Initial Jobless Claims 4500k 4427k 5237k
Apr-23 New Home Sales 642k 627k 741k
Apr-24 Durable Goods Orders -12.0% -14.4 1.1%
Apr-27 Hong Kong Exports YoY -14.6% 4.3%
Apr-28 Conf. Board Consumer Confidence 87.8 120.0
Apr-29 Germany CPI YoY 0.7% 1.4%
Apr-29 GDP Annualized QoQ -3.7% 2.1%
Apr-29 FOMC Rate Decision (Upper Bound) 0.25%
Apr-30 Eurozone CPI Core YoY 0.7% 1.0%
Apr-30 ECB Main Refinancing Rate 0.000% 0.000%
Apr-30 Initial Jobless Claims 3500k 4427k
May-1 ISM Manufacturing 37.0 49.1


  • The best performing metal this week was gold, up 2.78 percent. ETFs added 36,334 troy ounces of gold to their holdings on Thursday, bringing this year’s net purchases to 12.2 million ounces, according to Bloomberg data. That marks the 24th straight day of increases for ETFs backed by the yellow metal. Newmont, the world’s largest gold company, increased its quarterly dividend by 79 percent to signal how gold’s status as a haven is helping producers weather the coronavirus, reports Bloomberg. The U.K. Mint said sales of gold bullion coins and bars jumped 736 percent in March compared with a year earlier. The mint added that a fifth of new customers were under 35. Gold exports from Switzerland to the U.S. rose to 43.2 tons in March – the most since data going back to 2012, according to data from the Swiss Federal Customs Administration. The U.S. Mint reopened its West Point facility in New York this week after temporarily closing the plant last week.
  • Bank of America made two very bold precious metal price predictions this week. The bank said silver could rally to $20 an ounce due to a rebound of economic growth later in the year. Spot silver last traded at $20 in 2016 and is down 14 percent so far in 2020. Secondly, the bank says gold could nearly double to $3,000 an ounce over the next 18 months as central bank stimulus and economic turmoil drives record interest in the metal. The bank released this forecast in a report titled “The Fed can’t print gold.”

bank of america forecasts gold to hit record $3,000
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  • The silver market surplus is set to shrink by more than half in 2020 due to shuttered mines. Total silver supply is expected to top consumption by 14.7 million ounces this year, down significantly from 31.3 million last year, according to estimates by Metals Focus for the Silver Institute. Silver coin and bar demand is set to rise 16 percent – the most since 2013.


  • The worst performing metal this week was palladium, down 6.11 percent on the large drop in automobile buying, which could push the market to surplus this year. Precious metals fell early in the week as the broader market weakened along with oil prices. Gold futures for June delivery fell 1.4 percent to $1,687 an ounce by Monday afternoon, but then rose back above $1,700 later in the week.
  • Capital Economics said in a report that a decline in gold prices is looming in the month ahead as economies will come back online and demand for haven assets will fade. The firm predicts gold will fall back to $1,600 an ounce by year-end.
  • The coronavirus pandemic continues, and mine shutdowns have plagued metal prices and miners. China, the world’s top commodities buyer, recorded its first contraction in decades, reports Bloomberg. Miners globally are struggling to relocate workers amid mine shutdowns while facing the challenges of disrupted supply chains.


  • Although gold jewelry buying In India has been down for months, a new love for gold has emerged. The World Gold Council (WGC) wrote in a report this week that nearly 29 percent of retail investors who had never bought gold, now look forward to buying gold in the future. The report adds that gold is now a preferred investment option in the country.
  • K92 Mining share price got hit on Friday as Barrick Gold announced it was challenging the Papua New Guinea’s (PNG) government decision to not renew their special mining permit for their Poregera Mine. This initially weighed heavy on K92 Mining as its gold mine is also located in PNG and investors worried “was PNG changing their mining policy?” Apparently, the PNG government has specific issues with Barrick Gold that remains unresolved. St. Barbara Ltd. renewed its mining license recently and K92’s does not come up for renewal till 2024. The pullback in K92’s share price could be an attractive entry point. GFG Resources announced a non-brokered private placement to raise gross proceeds of up to C$5 million with Alamos Gold has committing to purchasing those securities to obtain a 9.9 percent interest in GFG. Roxgold Inc. released strong drilling results from its gold project in Cte d’Ivoire. Highlights include 12 meters at 13.8 grams per ton of gold and five meters at 28 grams per ton of gold.
  • A senior fund manager at Alternative Investments, Quantum AMC wrote their five reasons why gold can help investors get through a recession. 1) Counterparty risks in paper assets like bonds tend to increase during a recession, while gold cannot default. 2) Gold’s value is not dependent on revenues and profits, as equities are. 3) As central banks cut rates, fixed-income instruments will yield less. 4) Central banks are injecting massive amounts of liquidity, increasing the probability of higher inflation, which is historically good for gold. 5) Lastly, gold benefits from economic distress as people flock to perceived safe-haven assets.


  • Palladium could be looking at a small surplus in 2020 after years of a deficit that led to skyrocketing prices. Kitco News reports that palladium fell from an all-time high of $2,700 at the end of February to nearly $1,400 in mid-March on demand concerns surrounding coronavirus. The world’s top palladium producer, Norilsk Nickel, said that it expects a small surplus of around 0.1 million ounces. The surplus is projected to be temporary and that a deficit will resume once the world fully reforms after the pandemic subsides.
  • The seriousness of the coronavirus-fueled recession is reflected in April’s preliminary PMI readings. The composite PMI plummeted to 27.4, a new series low, as companies were shuttered and millions of non-essential workers were furloughed or laid off. A staggering 26.4 million people, or about 15 percent of the U.S. workforce, have now lost their jobs since mid-March.
  • Adding to the global stress of the coronavirus spread and efforts to treat infected patients, President Trump said on Thursday that scientists might investigate inserting cleaning agents into the body to cure COVID-19. White House Press Secretary Kayleigh McEnany said in a statement the next day: “President Trump has repeatedly said that Americans should consult with medical doctors regarding coronavirus treatment.” There has been contrasting information coming from the President and some of his top advisors surrounding the pandemic.

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Index Summary

  • The major market indices finished mixed this week. The Dow Jones Industrial Average lost 1.93 percent. The S&P 500 Stock Index fell 1.32 percent, while the Nasdaq Composite fell 0.18 percent. The Russell 2000 small capitalization index gained 0.32 percent this week.
  • The Hang Seng Composite fell 1.93 percent this week; while Taiwan was down 2.36 and the KOSPI fell 1.33 percent.
  • The 10-year Treasury bond yield fell 4 basis points to 0.60 percent.

Domestic Equity Market

SP 500 Economic Sectors weekly performance
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  • Energy was the best performing sector of the week, increasing by 1.67 percent versus an overall decrease of 1.32 percent for the S&P 500.
  • Apache Corp was the best performing S&P 500 stock for the week, increasing 25.91 percent.
  • Oric Pharmaceuticals Inc., which develops cancer treatments, rose 61 percent in its trading debut after raising $120 million in an upsized initial public offering priced at the top of a targeted range. The shares, which rose as much as 68 percent from their offer price, closed Friday at $25.77, giving the company a market value of $710 million.


  • Real estate was the worst performing sector for the week, decreasing by 4.35 percent versus an overall decrease of 1.32 percent for the S&P 500.
  • L Brands was the worst performing S&P 500 stock for the week, falling 25.18 percent.
  • L Brands Inc. stock sank 20.7 percent before it was halted on Wednesday after it confirmed that it received notice from Sycamore Partners that the private-equity firm plans to terminate the deal to purchase a 55 percent stake in Victoria’s Secret for $525 million.


  • Tusa. Carrier was spun off from United Technologies last month, ahead of United Tech’s April merger with Raytheon. Tusa sees Carrier as undervalued compared to its peers, he wrote in a report cited by Barron’s.
  • Sovereign bond yields hold the key to increased confidence in U.S. stocks, according to Deutsche Bank AG. Credit spreads are pricing in an ISM Manufacturing PMI in the low 50s — solidly in expansion territory — while the S&P 500 sees it in the mid-40s — or, not far from the dividing line — according to analysis from Deutsche Bank strategists led by Binky Chadha. That is a big difference from Treasuries, where 10-year yields are consistent with an ISM below 40 — suggesting decided economic weakness.
  • Nestle posted its fastest sales growth in nearly five years in the first three months of 2020 as consumers flocked to food brands including Stouffer’s.


  • Mortgage servicers New Residential Investment, Mr Cooper and PennyMac Financial Services fell in Friday trading after Treasury Secretary Steven Mnuchin said there is no plan to create a Federal Reserve facility to inject funding into non-bank mortgage servicers.
  • Industrial companies do not mean much to the S&P 500 these days. These companies accounted for just 7.8 percent of the S&P 500’s value as of Thursday, according to data compiled by Bloomberg.
  • Avis Budget Group Inc. is looking to sell bonds to help it get through the shutdown of the travel industry during the coronavirus pandemic, according to people with knowledge of the situation. The company is negotiating an amendment to existing credit agreements that would enable it to sell as much as $750 million of secured bond. The rental-car industry, like airlines and cruise line operators, has been battered by a global clamp down on non-essential travel to stem the spread of Covid-19.

The Economy and Bond Market



  • U.S. consumer sentiment showed signs of stabilizing in late April, though not enough to prevent a record monthly decline in the face of unprecedented layoffs and elevated concerns about personal finances. The University of Michigan’s final sentiment index for April slumped 17.3 points to 71.8 from a month earlier after a preliminary reading of 71. The measure, while the lowest since 2011, was higher than the median projection of 68 in a Bloomberg survey of economists.
  • New orders for key U.S.-made capital goods unexpectedly rose in March, although it is uncertain if the gains will be sustainable amid the coronavirus outbreak. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, edged up 0.1 percent last month. Economists polled by Reuters had forecast core capital goods orders plunging 6.0 percent in March.
  • U.S. house prices rose in February, up 0.7 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).


  • Another 4.4 million Americans filed for initial jobless claims last week, revealing that at least 26 million people have requested unemployment benefits since the coronavirus outbreak. In just one month, all job gains since the Great Recession have disappeared, according to new data released by the Department of Labor.
  • The oil and gas industry shed nearly 51,000 drilling and refining jobs in March, a 9 percent reduction that is likely to get worse as futures prices fell into negative territory Monday.
  • New Jersey had more than $34 billion of bonds downgraded by Fitch because of the financial toll the coronavirus pandemic is taking on the state’s finances. The company assigned a negative outlook on the ratings, indicating they could be lowered again as the state’s slim reserves, large pension-fund debts and history of budget shortfalls gives it little flexibility to deal with the economic slowdown.


  • The Fed has already thrown everything at the economy in a desperate bid to avoid total catastrophe amid the coronavirus shutdowns. This has left the Fed with few remaining new options. Policymakers are expected to sit tight when they meet next Tuesday and Wednesday for their first regular meeting since January. Nonetheless, markets will still be interested in what the Fed has to say as the Federal Open Market Committee’s (FOMC) updated economic projections will be published.
  • The Bank of Japan (BoJ) joined its central bank peers by beefing up its stimulus program when it met on March 16 for an emergency meeting. According to media reports, the BoJ is poised to go further into unchartered territory when it meets next Monday by removing the cap on the amount of government bonds it can purchase and by doubling the amount of commercial paper and corporate bonds it buys.
  • If risk sentiment is dampened by the data and the Fed’s forecasts, the U.S. dollar will likely continue to act as a haven and gain in the currency markets.


  • As governments dedicate more than $8 trillion to fight the coronavirus pandemic, a further widening in the gap between rich and poor countries threatens to exacerbate the global economy’s pain. Wealthy nations have delved deep to cushion the blow, but many African and Latin American economies have failed to reach even a few billion dollars in fiscal aid.

surging stimulus: governments worldwide pedge more than $8 trillion in fiscal support
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  • The central bank’s program, the first ever targeted at the $3.9 trillion municipal-debt market, will lend money for as long as two years to states and the largest cities and counties to help them avoid massive budget cuts as the deep economic slowdown decimates tax collections. But some states, like Colorado and Alabama, may find their ability to draw on the Fed limited by constitutional provisions that make it difficult for them to run up debt. Others, like Maine, Michigan and Illinois, have laws that require repayment of loans within a tight time frame, which could dissuade officials from borrowing. In some states, legislatures or voters may also need to approve debt issued under the Fed’s program before it is set to lapse at the end of September. The issues are likely to limit the scale of the Fed’s lending to states, underscoring the case that governors are making for direct aid from Washington to weather what threatens to be the gravest fiscal crisis in decades.
  • The yields on lower-rated munis are likely to move “substantially wider” against the benchmark over the coming months as investors expect an increase in problems on June and July debt payments, Matt Fabian and Lisa Washburn of Municipal Market Analytics wrote in a note to clients. It is “increasingly unlikely” that college on-campus education will resume in the fall, creating major pressure on higher ed enrollments and revenues.

Energy and Natural Resources Market



  • The best performing major commodity for the week was cotton. It had its biggest weekly gain in seven years, climbing 5.24 percent on speculation that China is going to import as much as 1 million tonnes. China is the top importer of cotton. Uranium prices are skyrocketing too as most commodities are falling. Uranium is up more than 31 percent so far in 2020, making it the best performing major commodity, according to Bloomberg. Coronavirus has hugely impacted the uranium production with Canada’s Cigar Lake mine shut in and partial compromise of uranium operations in Kazakhstan. The Trump administration released a report calling for expanding a proposed uranium reserve and taking other steps to help the U.S. commercial nuclear industry.
  • Nickel saw a third weekly advance as stainless steel demand recovers in China. Bloomberg reports that Chinese spot stainless steel prices hit the highest level in eight months, just as ore supply from top producer Philippines is hit by lockdown measures to stem the coronavirus pandemic. OCI Iowa Fertilizer reported a 35 percent increase in earnings in 2019. One industry the coronavirus has not impacted is fertilizer production, which was deemed critical infrastructure by the Department of Homeland Security.
  • Rio Tinto has taken the leading position on climate change, according to RBC Capital Markets. Rio’s climate change strategy was outlined in four areas over a webcast this week: producing materials essential for a low-carbon future, reducing the carbon footprint at existing operations, partner to reduce the carbon footprint across its value chain and enhancing resilience to physical climate risk.


  • The worst performing major commodity for the week was crude oil, which fell 31.64 percent. Oil fell below zero for the first time ever this week. Eventually WTI crude for June delivery increased to nearly $17 a barrel after the May contract fell to as low as negative $40 on Monday. The world is quickly running out of places to store the glut of oil caused by a massive drop in demand due to coronavirus lockdowns. U.S. operators have begun shutting old wells and halting new drilling that could reduce output by 20 percent. Oil recovered and rose as much as 32 percent on Thursday. Equinor ASA cut its dividend – becoming the first oil major to do so. According to data compiled by Bloomberg, distressed debt in the U.S. energy sector jumped to $190 billion, up more than $11 billion in less than a week on the heel of negative oil prices. In a glimmer of hope for the industry, President Trump said in a tweet on Tuesday that “we will never let the great U.S. Oil & Gas Industry down.” Such a meltdown in oil prices will be very negative for Saudi Arabia and Russia – two oil supermajors with economies tightly linked to the price of crude.

may WTI Oil futures collapsed below zero before expiring
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  • Cheniere Energy’s LNG export terminals are facing at least 10 canceled shipments as buyers struggle with weaker demand for the fuel. Although natural gas has not been as hard hit as oil, the industry is still facing weaker demand and a surplus. Bloomberg notes that most LNG contracts have a take-or-pay clause where sellers still get paid regardless of whether the buyer has a physical need for the fuel. Producers are selling unwanted cargoes at record low prices after two mild winters has left the fuel at about a tenth of its peak six years ago.
  • A toilet paper squeeze could get even worse. Bloomberg reports that 25 percent of Canadian sawmill capacity is shut after two producers idled operations amid a price slump and poor outlook for spring building. Supply cuts meant to help the lumber market instead led to a shortage of wood chips that are used to make toilet paper, wipes, cardboard boxes and more. Another shortage on the way? Meat. JBS SA, the world’s top meat company, closed its Minnesota facility after a coronavirus outbreak. Bloomberg reports that the facility accounts for almost 5 percent of total U.S. capacity. Some industry analysts believe there may only be 2-weeks supply of frozen meat in cold storage.


  • Societe Generale said in a note that miners are “masters of survival” and are set to bounce back. The note says that all diversified miners offer upside potential and upgraded BHP and Anglo to a buy. Bloomberg reports that the group says the selloff is largely complete.
  • Sekisui Chemical Co. has developed technology to use microbes to make ethanol by gasifying combustible municipal waste, writes BloombergNEF. The company says that a pilot plant will be built this year and that the waste-derived ethanal can be used as feedstock for polyethylene plastic. If this new effort is successful, it could reduce crude demand, reduce waste and help countries become more resource independent.
  • Former vice president Joe Biden is all but confirmed as the Democratic nominee for president. If Biden were to win the election in November, it could lead to a big increase in infrastructure spending. According to Veda Partners, there’s potential for an infrastructure funding bill of between $1.5 trillion to $2 trillion, versus a bill in the lower range of $500 million to $800 million from a re-elected President Trump.


  • The World Bank said in a report that energy prices will be 40 percent lower this year than in 2019 and that global commodities markets will face a lasting disruption due to the coronavirus pandemic. The organization said that oil’s massive collapse this week will be followed by the weakest recovery in history. The World Bank cut its forecast for average oil prices in 2020 to just $35 a barrel, down from the forecast of $58 a barrel in October.
  • According to the U.S. National Centers for Environmental Information, parts of the Atlantic, Pacific and Indian Oceans all hit records for warmth last month. The high temperatures could lead to more extreme weather events this year such as hurricanes and thunderstorms.
  • The Nuclear Regulatory Commission is allowing six U.S. power plants to extend workers’ shifts to as long as 12 hours a day for two weeks – up significantly from current standards that require workers to get two or three days off a week when working such long shifts. Bloomberg reports that utilities want to delay inspections that require people to work in close proximity as a coronavirus precaution. However, there are concerns that it could lead to further deviations from safety rules and result in overworked employees. 42 construction workers tested positive for COVID-19 at a nuclear plant in Georgia.

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Emerging Europe



  • Russia was the best performing country this week, gaining 1.1 percent. Equites in local currency managed to move higher despite the increasing number of COVID-19 infections and the price of Brent crude oil declining by 21 percent over the past five days. The Russian ruble weakened against the dollar by 1 percent; not much, considering the huge drop in the price of oil. The Russian central bank cut its main rate by 50 basis points on Friday and has room to lower rates further. Polymetal International, a Russian gold producer, was the best equity trading on the Moscow Stock Exchange, gaining 10 percent over the past five days.
  • The Czech koruna was the best relative performing currency this week, losing 50 basis points. The currency outperformed its peers on optimism around the country easing lockdowns. The Central Bank has been cutting rates since the start of the year and has more room to ease further, if needed.
  • Materials was the best performing sector among eastern European markets this week.


  • Poland was the worst performing country this week, losing 1 percent. The banking sector underperformed. Bank Pekao SA was the weakest equity trading on the Warsaw Stock Exchange, losing 9.6 percent over the past five days. Shares of Poland’s third-largest lender dropped to a level last seen in November 2000 after the announcement of a management reshuffle and a prior decision not to pay dividends from last year’s profits.
  • The Hungarian forint was the worst performing currency in the region this week, losing 1.2 percent. The Central Bank plans to start asset purchases in the first week of May to lower borrowing costs on longer-debt securities. The government is projecting the country’s output to contract by 3 percent this year, assuming lockdowns will end in the first half of the year.
  • Healthcare was the worst performing sector among eastern European markets this week.


  • According to the latest GDP forecast by the International Monetary Fund (IMF), world output is expected to contract by 3 percent this year versus expansion of 3 percent, as previously estimated. However, the IMF noted that if “the pandemic fades in the second half of 2020, and policy actions taken around the world are effective” then global growth will rebound to 5.8 percent in 2021. Moreover, this year developing/emerging economies should record stronger growth than developed nations.

international monetary fund (IMF) forecasts strong rebound in 2021
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  • Charlie Robertson from Renaissance Capital believes the lockdowns could be eased in six states in the U.S., as well as Central Europe and Greece. He views five cases per 100,000 as the appropriate level to not have a lockdown, assuming positive tests are around 1 percent of total tests. Some countries are already easing their lockdowns. In Denmark, children aged up to 11 can now go back to primary school. Germany, Austria and the Czech Republic are also easing their lockdown restrictions.
  • The Czech Republic’s Skoda Auto announced that it will restart production of Czech factories on April 27, with stricter hygiene conditions. In order to provide the best-possible protection to prevent employees from becoming infected by the coronavirus, the car manufacturer has approved a set of comprehensive measures for all areas of the business. More than 80 individual precautions, defined together with the social partner KOVO Union, include both specific steps to keep the workforce healthy and organizational provisions to prevent the spread of COVID-19 in the workplace.


  • European Central Bank (ECB) President Christine Lagarde told the region’s leaders that the euro-area economy could shrink by as much as 15 percent as a result of the pandemic and that they risk doing too little, too late. Flash April PMIs came out on Thursday and the Service PMI slumped to a record low of 11.7. Manufacturing fell to 33.4, bringing the composite PMI to 13.5, well below the 2008 crisis level.

euro-area anguish
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  • Reuters reported that Europe’s banks are expected to have to set aside billions for potential loan losses, as well as take profit hits because of the coronavirus crisis, when they start reporting results over the next two weeks. It highlighted that analysts over the past 30 days have revised upward by almost 130 percent their expectations for loan loss provisions in 2020 by Europe’s most important banks. Europe is preparing for a spike in downgrades; the ECB announced Wednesday it would allow bonds below investment grade to be used as collateral in its repo operations until September 2021.
  • Tatneft, a Russian oil and gas company, recommended to withhold the final dividend payment for 2019, citing the need to mobilize financial resources to ensure the company’s normal operation in the current environment. The first nine-month dividends were already significant at RUB64.47/share (12.5 percent yield). Alex Burgansky believes an above-policy dividend is no longer likely for 2020 and reduced the 2020 DPS estimate to RUB50.6/share, to reflect current yields of 9.8 percent (common) and 10.2 percent (prefs). This is a threat for the whole sector as other companies may follow Tatnef’s decision.

China Region



  • Thailand was the best performing country this week, gaining 1.6 percent. Thailand’s trade balance was reported better than expected. Customs-based exports in March rose 4.2 percent from a year earlier, the strongest pace in eight months, boosted by shipments of gold and electronics. Imports in March rose 7.3 percent from a year earlier, led by fuel as well as raw and semi-finished products. Electronics Industry PLC was the best performing equity among stocks trading in the Thailand SET 50 Index, gaining 12 percent over the past five days.
  • The Pakistani rupee was the best performing currency this week, gaining 1.9 percent. Pakistan’s central bank has cut rates the most this year, however, the currency appreciated as the government took steps to improve external and fiscal imbalances and announced that it is ready to take more actions if there is a need.
  • Consumer discretionary was the best performing sector in the HSCI Index this week.


  • The Philippines was the worst relative performing country this week, losing 5.6 percent. President Rodrigo Duterte extended the lockdown on the capital region and nearby areas by two weeks to May 15. He also placed the provinces of Cebu, Davao and Iloilo, which are major economic areas, under lockdown. Alliance Global Group Inc., a holding company, was the worst performing equity trading on the Philippines Stock Exchange, losing 11 percent over the past five days.
  • The South Korean won was the worst performing currency this week, losing 1.4 percent. The currency fell as investors pulled money from emerging-market funds, posting the sixth-largest outflow on record at $7.4 billion for the week through April 22, according to Bank of America. India’s rupee and South Korea’s won led currencies lower.
  • Consumer services was the worst performing sector in the HSCI Index this week.


  • CLSA reports that China’s property market has shown signs of recovery. First quarter sales volume, new starts and land sales narrowed to 23 percent from 27 percent compared to year-over-year declines of 29 percent to 45 percent in February. Construction activity resumed in March, resulting in a year-over-year increase in real estate investment, according to NBS data.
  • China is stepping up policy incentives to encourage new energy vehicle production (NEV) and sales after the industry was essentially halted in the first quarter. Ministry of Industry and Information Technology official Huang Libin said that China will promote vehicle electrification in public sectors and extend tax exemptions on NEV purchases by an additional two years.
  • The great oil collapse has a winner: India. The country is a large exporter of the fuel and benefits from lower prices. According to JPMorgan Private Bank, Indian bonds now have the upper hand over Indonesian bonds as developing nations compete for foreign money. Indonesia is a big commodity producer – the top palm oil producer and top thermal coal shipper – and will be hit hard by the oil-led decline in commodity prices. According to Bloomberg data, India’s domestic bonds are at a 2 percent loss in dollar terms in 2020 while Indonesian bonds have fallen 11 percent.

now cheaper to insure india's sovereign debt than indonesia's
click to enlarge


  • The South China Morning Post reported this week that GDP fell nearly 40 percent in Hubei province in China in the first quarter. The province was the original epicenter of COVID-19 and was under a strict lockdown for 10 weeks to help contain the spread of the virus. The province is a key production base of autos and parts for the country and saw a 60 percent plunge in car production for the quarter. This is a stark warning for other regions that are facing continued shutdowns.
  • Singapore announced that it will extend its partial lockdown until June 1 and will provide an additional $2.7 billion in stimulus to support businesses. Bloomberg notes that the announcement comes just two weeks after the country imposed “circuit breaker” measures that closed schools and most post offices. The small island nation has seen an increase in cases since late March with 70 percent of confirmed infections from foreign workers.
  • The Bank of Japan said in its semiannual Financial System Report that losses on banks’ securities investment could deteriorate due to financial market moves and foreign currency funding could become destabilized. Although Japan’s financial system has shown resilience to the coronavirus slump, lenders must still brace for rising bad-loan costs and investment losses.

Blockchain and Digital Currencies



  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended April 25 was Ormeus Ecosystem, up 1,323 percent. The price of bitcoin also managed to hold above the $7,000 mark this week.

bitcoin climbs back above the $7,000 level
click to enlarge

  • According to a blog post by the company’s head of risk, the Winklevoss brothers’ Gemini cryptocurrency custodian and exchange has obtained a new security qualification known as SOC 1 Type 1, reports CoinTelegraph. Passing an SOC 1 review means that Gemini’s financial operations and customer reporting controls comply with requirements set by the American Institute of Certified Public Accountants. The examination was carried out by accounting firm Deloitte, the article goes on to explain, with Gemini becoming the world’s first digital currency custodian and exchange granted this type of certification.
  • If bitcoin were a government-issued currency, it would be one of the world’s top performers, reports CoinDesk. “Bitcoin is behaving as a store of value much the same as king dollar is behaving as a store of value,” Paul Brodsky, partner at cryptocurrency and blockchain investment firm Pantera Capital said. Crypto investors see bitcoin as a hedge against inflation, like gold, and believe the digital asset will eventually benefit from the Fed’s trillions of dollars of emergency money injections, spurring inflation in the long run, the article continues.


  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended April 25 was Castweet, down 89.15 percent.
  • Amid the COVID-19 pandemic, the number of cybercrime reports received by the Federal Bureau of Investigations (FBI) has more than tripled, reports CoinTelegraph. “Whereas they might typically receive 1,000 complaints a day through their internet portal, they’re now receiving something like 3,000-4,000 complaints a day,” said Tonya Ugoretz, deputy assistant director of the FBI.
  • According to two academic papers, cryptocurrency users should be warned that the Lightning Network can expose financial information of bitcoin payments thought to be anonymous, reports CoinDesk. “The gap between the potential privacy properties of the Lightning Network and the actual ones is large,” said Ania Piotrowska, a cryptocurrency researcher at the University College London. “As it is designed right now, the Lightning Network opens the door for various attacks.”


  • One of the most popular U.S. cryptocurrency exchanges, Coinbase, announced that it has hired Barclays Capital veteran Brett Tejpaul to serve as head of institutional coverage, reports Bloomberg. Tejpaul was with Barclays for 17 years, serving as the global head of sales across all fixed income and equities, as well as global head of credit and commodities. According to the article, he will now focus on expanding Coinbase’s institutional client base, while introducing new features and services for large clients.
  • Arrano Capital, the blockchain arm of Hong Kong asset manager Venture Smart Asia, announced on Monday the rollout of its bitcoin fund – Hong Kong’s first approved cryptocurrency fund. The passive fund targets institutions investing in digital money and has laid out a target first-year size of $100 million, reports Bloomberg.
  • A recent report from Bloomberg, “Bitcoin Maturation Leap” reveals that bitcoin could be preparing for a massive bull run as it experienced in 2017. In the report, Bloomberg also outlines that both bitcoin and gold are considered hedge assets and are expected to win the most from recent COVID-19 induced market turmoil, writes CoinDesk.


  • Bitcoin’s ride above the $7,000 mark floundered over the weekend, reports Bloomberg, and technical indicators now paint a bleak outlook. Cryptocurrencies have moved relatively in line with riskier assets over the past month. As the article goes on to explain, the moving-average convergence divergence indicator, which is a measure of momentum, suggests that bitcoin’s bullish trend is losing steam.
  • Chainalysis, a blockchain intelligence firm, reports that over $900,000 in bitcoin went to child sexual abuse material providers last year on the darknet, reports CoinTelegraph. Unfortunately, the report shows that this represents a 32 percent increase over 2018, which had in turn presented a 212 percent increase over the previous year.
  • Just four months after taking on the role, Bakkt CEO Mike Blandina is stepping down, reports CoinDesk. The shakeup was confirmed via a press release. Blandina will be replaced by David Clifton, vice president of M&A and integration at Bakkt parent company Intercontinental Exchange (ICE).

Leaders and Laggards

Weekly Performance
Index Close Weekly
10-Yr Treasury Bond 0.60 -0.05 -7.15%
Oil Futures 17.12 -1.15 -6.29%
Hang Seng Composite Index 3,333.36 -65.63 -1.93%
S&P Basic Materials 313.51 -2.80 -0.89%
Korean KOSPI Index 1,889.01 -25.52 -1.33%
S&P Energy 264.51 +4.34 +1.67%
Nasdaq 8,634.52 -15.62 -0.18%
DJIA 23,775.27 -467.22 -1.93%
Russell 2000 1,233.05 +3.96 +0.32%
S&P 500 2,836.74 -37.82 -1.32%
Gold Futures 1,741.60 +42.80 +2.52%
XAU 117.55 +13.27 +12.73%
S&P/TSX VENTURE COMP IDX 462.64 +17.77 +3.99%
S&P/TSX Global Gold Index 346.91 +40.63 +13.27%
Natural Gas Futures 1.72 -0.03 -1.88%


Monthly Performance
Index Close Monthly
Korean KOSPI Index 1,889.01 +184.25 +10.81%
10-Yr Treasury Bond 0.60 -0.27 -31.38%
Gold Futures 1,741.60 +107.30 +6.57%
S&P Basic Materials 313.51 +37.80 +13.71%
S&P 500 2,836.74 +361.18 +14.59%
DJIA 23,775.27 +2,574.72 +12.14%
Nasdaq 8,634.52 +1,250.23 +16.93%
Oil Futures 17.12 -7.37 -30.09%
Hang Seng Composite Index 3,333.36 +101.59 +3.14%
S&P/TSX Global Gold Index 346.91 +84.66 +32.28%
XAU 117.55 +28.72 +32.33%
Russell 2000 1,233.05 +122.69 +11.05%
S&P Energy 264.51 +44.49 +20.22%
S&P/TSX VENTURE COMP IDX 462.64 +66.97 +16.93%
Natural Gas Futures 1.72 +0.06 +3.68%


Quarterly Performance
Index Close Quarterly
XAU 117.55 +14.62 +14.20%
S&P/TSX Global Gold Index 346.91 +87.11 +33.53%
Gold Futures 1,741.60 +164.30 +10.42%
DJIA 23,775.27 -5,384.82 -18.47%
S&P 500 2,836.74 -488.80 -14.70%
Nasdaq 8,634.52 -767.96 -8.17%
Korean KOSPI Index 1,889.01 -357.12 -15.90%
Natural Gas Futures 1.72 -0.21 -10.70%
S&P Basic Materials 313.51 -64.37 -17.03%
Russell 2000 1,233.05 -451.96 -26.82%
Oil Futures 17.12 -38.47 -69.20%
Hang Seng Composite Index 3,333.36 -476.53 -12.51%
S&P/TSX VENTURE COMP IDX 462.64 -119.74 -20.56%
S&P Energy 264.51 -170.30 -39.17%
10-Yr Treasury Bond 0.60 -1.14 -65.55%


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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 (03/31/2020):

Polymetal International PLC
Tatneft PJSC
Newmont Corp
GFG Resources Inc
Alamos Gold Inc
Roxgold Inc
MMC Norilsk Nickel PJSC
BHP Group Ltd
Anglo American PLC
Alacer Gold Corp
Evolution Mining Ltd
Impala Platinum Holdings Ltd
Highland Gold Mining Ltd
B2Gold Corp
Kirkland Lake Gold Ltd
St Barbara Ltd
Northern Star Resources Ltd
Barrick Gold Corp
Wheaton Precious Metals Corp

*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 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 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 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. 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. 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 of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The Bangkok SET Index is a capitalization-weighted index of all the stocks traded on the Stock Exchange of Thailand. The Federal Housing Finance Agency (FHFA) House Price Index (HPI) is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties. This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975. The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan.