A quick look at gold price movements since late September might suggest that the gold rush of 2019 is over.
After hitting six-and-a-half-year highs above $1,540 per ounce early last month, prices plummeted later on, dropping around 60 bucks in the course of a week at the end of September. So much for the march to fresh record peaks around $2,000 that some had been predicting, right?
My message to the bears, however, is not to be too hasty in writing the yellow metal off just yet. Gold has stormed back through $1,500 per ounce in recent days and I for one believe there’s plenty of ammunition out there to push it to new milestones.
Lots of ammo
Make no mistake: there’s enough macroeconomic and geopolitical jitteriness out there to keep demand for safe-haven assets like gold bubbling higher. This was evident from latest World Gold Council data this week which showed total holdings in global gold-backed exchange-traded funds (ETFs) and similar products rising again in September, despite that bad end to the month.
In fact, inflows into ETFs and similar instruments were so strong (at 75.2 tonnes) that total holdings boomed to 2,808 tonnes, a record high and taking out the previous top of late 2012. And arguably, there’s more reason for investors to protect their wealth by buying flight-to-safety assets than there was a month ago.
Economic data from across the world has been pretty worrying for much of 2019, but key trade and manufacturing gauges have got particularly bad over the past few weeks. The longer the trade spat between the US and China drags on too, the worse these barometers are likely to become.
The long-running America-China dispute isn’t the only political issue driving flight-to-safety demand for precious metals either. As I type, gold is rising again following a breakdown of discussions between UK and European Union lawmakers to strike a Brexit deal, thus raising the chances of a disorderly withdrawal at the end of October.
And looking back across the Pond, the circus surrounding impeachment proceedings against President Donald Trump is also a good omen for gold prices in the near term and beyond.
Delicious diggers
So, as investors, what’s the best way to get access to the bright gold price? Well I would argue that, rather than buying into one of those ETFs or purchasing physical bars, ingots or coins, that you’d be better served buying shares in one or more of the London Stock Exchange’s listed precious metals producers.
It may be a riskier strategy than buying gold directly. After all, the business of pulling metal out of the ground is fraught with risk that can significantly impact earnings. But I would argue that the pull of big dividends is worth the added peril. And with the likes of Polymetal International and Centamin, for instance — shares that carry monster, inflation-bashing forward yields of 4.2% and 5.3% respectively — it really is quite possible to receive some monster income flows.
