Why Should Generalists Consider Gold?

.PLEASE SEE APPENDIX FOR THE FULL DISCLAIMER – FOR ADVISOR USE ONLY

Why Should Generalists Consider Gold?

March 3 2020

Name ExampleTitle ExampleTitle ExampleTitle Example

Mark Stacey, MBA, CFASenior Vice-President, Co-CIO AGFiQ Quantitative Investing Head of Portfolio Management, AGF Investments Inc.

PLEASE SEE APPENDIX FOR THE FULL DISCLAIMER – FOR PROFESSIONAL USE ONLY

Why are investors not buying Gold and Gold Stocks?

The Macro and The Market Backdrop Matters

PLEASE SEE APPENDIX FOR THE FULL DISCLAIMER – FOR PROFESSIONAL USE ONLY 3

Source: FactSet. As of January 31st 2020. Chart depicts the US dollar price index (DXY).

• US dollar strength has been a headwind to gold. • Gold typically trades in the opposite direction of the US dollar.

70

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110

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

+35.8%

US Dollar Strength

DXY (Price Level)


Muted Inflation in the US

Source: FactSet. As of December 31 2019. Graph depicts the rolling year over year Core PCE deflator in the United States.

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

Core PCE Deflator Y\Y

• Gold is often viewed as a hedge to inflation.• Global economies have grown with limited inflation.

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Market Backdrop


US Equity Market Outperformance

Source: Bloomberg. As of January 31 2020. 1Graph depicts the total return index indexed to 100 starting at March 11 2009. 2Shows the total return of each respective index from March 11 2009 - January 31 2020 in local currency. Proxies used are as follows: S&P 500 Index for the US, S&P/TSX Composite for Canada, MSCI Europe for Europe, MSCI Emerging Markets for Emerging Markets and MSCI Japan for Japan.

• The US market has been the clear outperformer in the world.

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475%

263%

188%

208%197%

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650

Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Total Return Index1

US Canada Europe Emerging Markets Japan

Total Return2


Growth Outperforming Value

Source: Bloomberg. As of January 31 2020 in USD. 1Graph depicts the price ratio of the S&P Growth Index (SGV) vs. the S&P Value Index (SVX).

• In a low growth economy investors have been rewarding stocks with better growth fundamentals versus stocks that are cheap.

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0.80

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1.00

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SGX Index / SVX Index1


Are we at a tipping point?


Signs of Waning US Dollar Outperformance

Source: FactSet. As of January 31 2020. 1Graph depicts the rolling 12 month return of the US dollar price Index (DXY).

-30%

-20%

-10%

0%

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30%

US Dollar (12 Month Rolling Return)1

DXY (12 Month Rolling Return) Upper Bound Lower Bound

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10 Year Rolling Return of Gold

Source: Bloomberg. As of January 31 2020. 1Graph depicts the 10 year rolling return of the Gold / USD exchange rate.

• Long-term returns for Gold look to be bottoming.

-100%

0%

100%

200%

300%

400%

500%

600%

XAU (10 Year Rolling Return)1

10 Year Rolling Return Upper Bound Lower Bound

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Gold and Gold Stocks vs. US Equities

Source: Bloomberg. As of January 31 2020. 1Graph depicts the price ratio of iShares S&P/TSX Global Gold Index ETF (XGD) and S&P 500 (SPX) in local currency 2 Graph depicts the price ratio of the Gold / USD Dollar exchange rate (XAU) to the S&P 500 (SPX) in local currency..

0.000

0.005

0.010

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0.020

0.025

0.030

Gold Stocks / US Equities1

• Both Gold and Gold Stocks look to be bottoming vs the stock market.

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0.0

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1.0

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Gold / US Equities2


US IT vs. US Gold Stocks

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20S5INFT Index / S5GOLD Index1

Source: Bloomberg. As of January 31 2020. 1Graph depicts the price ratio of the S&P 500 Information Technology Index (S5INFT) to the S&P 500 Gold Index (S5Gold).

• FANG/MAGA peak looks similar to the Internet Bubble.

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Why Investors need Gold Stocks?


The Asset Allocation Decision has Changed

Source: FactSet and Bloomberg. As of January 31 2020. 1Recent 10 year period: January 31 2010 – January 31 2020. 2S&P 500 start date: January 1 1960, and iShares 20+ Year Treasury Bond ETF start date: July 26 2002 based on availability of data.

Asset ClassRecent 10 Year

Annualized Return1

Average 10 Year Annualized

Return2

US Equity (S&P 500 Index) 14.0% 7.6%

Long-Term US Treasury Bonds (iShares 20+ Year Treasury Bond ETF) 7.8% 3.1%

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% of Portfolio

Equities Fixed-Income

% of Portfolio

Equities Fixed-Income Alternatives


Gold and Gold Stocks in Market Drawdowns

Source: Bloomberg. Graphs depicts price return of the S&P 500 (SPX), SPDR Gold Trust (GLD) and iShares S&P/TSX Global Gold ETF (XGD) in local currency given drawdown periods.

-20%

-10%

0%

10%

20%

30%

40%

50%

09/13/11 -10/03/11

10/28/11 -11/25/11

04/02/12 -06/04/12

05/21/13 -06/24/13

12/01/15 -02/21/16

01/26/18 -02/08/18

09/20/2018 -12/31/18

05/03/19 -05/31/19

07/26/19 -08/05/19

02/19/2020 -02/25/2020

Gold and Gold Stocks as a Hedge Against Drawdowns

SPX GLD XGD

• Gold and Gold stocks are reclaiming their diversification role.

S&P 500 Index Correlation to Select Index (01/31/2005 – 01/31/2020)

GLD US Equity XGD CN Equity

0.03 -0.02

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Rolling Gold vs. Gold Stocks

Source: FactSet. As of January 31 2020. 1Graph depicts the 12 month rolling return spread of the generic 1st GC Future vs. SP/TSX CMP Gold GSI Index.

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Gold vs. Gold Stocks (12 Month Rolling Return Spread)1

12 Month Rolling Return Spread Upper Bound Lower Bound

• Investors have the opportunity to tilt between Gold and Gold Stocks.

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Source: S&P Global Market Intelligence. Chart depicts the exploration budgets by major gold companies from 2003 – 2017 in USD billions. See disclosure page 24 for gold companies used in analysis.

• Gold companies shifting capex to lower risk exploration.

Early Stage Greenfield Late Stage Greenfield Brownfield

% of Budget

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Stock Selection Moves From Exploration to Execution


Fundamentals of Gold Stocks

Source: FactSet. As of January 31 2020. Charts depict the respective fundamental of gold stocks in the S&P/TSX Composite Index.

-5%0%5%

10%15%20%25%30%35%40%45%

EBIT Margin

-200%-150%-100%-50%

0%50%

100%150%200%250%

Earnings Surprise

• Executing on Growth.

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Source: FactSet. As of January 31 2020. Charts depict the respective fundamental of gold stocks in the S&P/TSX Composite Index.

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Return on Equity

• More efficient use of capital. • Greater profitability.

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0.40

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1.00

1.10

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Capex vs. Trend



Source: FactSet. As of January 31 2020. Charts depict the respective fundamentals of gold stocks in the S&P/TSX Composite Index.

-15%-10%-5%0%5%

10%15%20%25%30%

Annualized Dividend Momentum

• Generating cash flow for future growth.

• Rewarding investors for holding the stock.

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-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Operating Cash Flow Growth (1 Year)



Source: FactSet. As of January 31 2020. Graph depicts the rolling 300 day volatility of gold stocks in the S&P/TSX Composite Index.

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40%

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300 Day Volatility

• Being relevant for the asset allocation decision and operational execution is leading to lower Price Volatility.

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Q&A


Disclaimer & Disclosures


Disclosures: Gold Companies Used in Analysis

• Agnico Eagle* • AngloGold Ashanti• Barrick*• China National*• Freeport-McMoRan• Gold Fields• Newmonth Goldcorp*• Harmony• Kinross• Navoi Mining and Metallurgy Combinant• Newcrest• Nord Gold• PJSC Polyus• Polymental International• RandGold Resources• Shandong Gold

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*Current portfolio holding of AGFiQ as of January 31 2020.


DisclaimersAGFiQ Asset Management (AGFiQ) is a collaboration of investment professionals from AGF Investments Inc., a Canadian registered portfolio manager, and of AGF Investmemts, LLC (Formely FFCM), a U.S registered adviser. This collaboration makes up the quantitative investment team.

The All World Tax Advantage Group is a mutual fund corporation that currently offers approximately 20 different classes of securities. In addition to fund diversification by investment style, geography and market capitalization, a key benefit of investing in any of the classes within the group is the possibility of sharing incurred expenses (and losses) of the combined structure potentially offsetting income earnings to minimize chance of a dividend declaration. For a more detailed explanation, please see AGF.com/disclaimers.©2019 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial advisor which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing, The indicated rates of return is [are] the historical annual compounded total return(s) including changes in [share or unit] value and reinvestment of all [dividends or distributions] and [do] does not take into account sales, redemption, distribution or operational charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

The information contained herein is intended to provide you with general information related to investment alternatives and strategies and is not intended to be comprehensive investment advice applicable to the circumstances of a specific investor. Commentary and portfolio characteristics are the opinion of the Portfolio Manager based on market conditions as of January 31 2020. References or inferences to returns do not take into account any management fees, transaction costs, commissions, custodial fees, taxes or other costs that apply when purchasing securities. We strongly recommend consulting with a professional advisor prior to making investment decisions.

This document does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Any decision to invest in any asset noted herein should not be made in reliance on any information herein as the inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. Exposure to an asset class represented by an index is available through investable instruments based on that index. We make no assurance or guarantee that investment products based on an index will accurately track index performance or provide positive investment returns.

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Disclaimers (…Continued)

The MSCI information may only be used for your internal use, may not be reproduced or disseminated in any form and may not be used as a basis for, or a component or, any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information(collectively, the “MSCI Parties”) expressly disclaims all warranties(including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness fora particular purpose) with respect to this information. Without limited any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential(including, without limitation, lost profits) or any other damages.(www.msci.com)References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AGF Investments Inc. The specific securities identified and described herein do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.

This document may not be reproduced (in whole or part), transmitted or otherwise made available to any other party without the prior written consent of AGF Investments Inc. and AGF Investments, LLC.

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Publication date: February 28 2020.

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Why Should Generalists Consider Gold?