Japanese yen gains

Currency markets experienced some volatility in July but without much to show for it in the end. The winner was the Japanese yen, which became more attractive in relative terms as global bond yields melted down, diminishing its chronic interest rate disadvantage.

Meanwhile, the British pound posted a comeback to end the month higher as expectations for a hawkish shift by the Bank of England overpowered concerns around the Delta outbreak. The euro was little changed despite the ECB locking itself into negative rates for longer. That was also true for the dollar, after the Fed signaled that rate increases are still far away.

Finally, gold prices managed a decent recovery, drawing power from real US yields hitting new record lows. July was a drawdown month for the Fund, suffering losses and ultimately reducing the NAV. Although there were various reasons for that, the most predominant one was the sharp sideways movements in the market which caused small but consecutive losses after the second half of the month. These sideways movements were exaggerated due to the lack of liquidity during the summer month, leading to price movements without an underlying basis (apart maybe from some minor news releases in certain cases) causing them to be short lived and erratic.

The effect of these atypical market dynamics had a result of providing misleading signals to our models, ultimately mispositioning our strategy in the market. Although such drawdowns happened in the past and are expected as a performance correction, our efforts are continuous in minimizing the magnitude and duration of them.

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