Gold’s one of the hottest games in town right now. It’s taken out key technical hurdles above $1,400 per ounce and strode to levels not seen since the spring of 2013, just above $1,430.
It’s since taken a step back on some light profit taking. But make no mistake, investor demand for the safe-haven remains rock-solid. And this was underlined by recent data from the World Gold Council. According to the body, some $5.5bn worth of inflows, equivalent to 127 tonnes, went into global gold-backed exchange-traded funds (ETFs) in June “as geopolitical uncertainty increased and central banks signalled a shift to a more accommodative policy over the coming months.”
More to come?
This was the largest monthly inflow (in dollar terms) since 2012, and there are numerous reasons to expect gold holdings to keep on bulging.
As signs of a more doveish monetary policy from the Federal Reserve have risen, expectations of interest rate cuts from Brussels and London to Beijing have also gained traction. And the relentless stream of poor economic data from all over the globe means the prospect of several benchmark rate reductions is only likely to rise as 2019 progresses.
Throw the unresolved issue of US-related trade wars into the bargain, Britain slipping closer to the Brexit cliff-edge, and Iran showing little signs of backing down in its high-stakes diplomatic spat with Washington, well there’s plenty of reason to expect bullion prices to keep making progress.
But there’s more than one way to capitalise on the rampant gold price right now. Rather than buy physical bars or coins, or invest in one of those aforementioned ETFs, I believe a much better way to make your money work for you is by buying into London’s listed gold producers.
Dividend darlings
Why? The payment of dividends to investors by such mining stocks are extra rewards which don’t come with playing the gold market. And some of the predicted dividends of these businesses are pretty darn impressive.
Take Pan African Resources and Polymetal Resources and their forward yields around 4.5%. Or Trans-Siberian Gold and its 5.5% prospective yield.
Of course investors need to be prepared to take some of the risk associated with the mining industry, namely uncertainty over potential payloads and unexpected production disruptions which can hammer output levels and ramp up costs.
However, those diggers I’ve mentioned are all making brilliant progress operationally. Speaking of which, Acacia Mining announced this week gold production surged almost 20% year-on-year in Q2, thanks to blowout production in Tanzania. And what’s the forward yield over at this particular share? A monster 6.2%, if you’re asking.
While all of these yields are pretty delicious, it’s possible to get hold of some bigger dividend payers in the near term at least. However, if you’re looking for a blend of jumbo payouts and the possibility of some stratospheric share price gains in the months ahead, you may well be better off ploughing your investment cash into these mining mammoths instead.
