Grabbing exposure to precious metals would seem to be a grand idea as the threat of another stock market crash is ever present. Gold in particular is the one sentimental metal that tends to grab the headlines, and this proved the case again in the last week. The yellow metal surged back above $1,730 per ounce in end-of-week trading and it’s a hair’s breadth away from printing new seven-year peaks.
Fears over the legitimacy of fiat currencies have been a major driver of precious metals more recently. It’s a symptom of frantic money-printing by global central banks. But this hasn’t been the catalyst for gold in recent hours. Instead, rising acrimony between the US and China and worries over a bitter trade war have sent market-makers piling back into safe-haven assets. President Trump’s threat that “we could cut off the whole relationship” illustrates how frosty things have become.
Experts continue to speculate on the extent of the damage caused by the Covid-19 outbreak. But it’s clear that the effects are going to be pretty bad. In the current economic and political landscape, it pays to remain well invested in flight-to-safety commodities. And I for one would like to get exposure to timeless assets like gold by buying shares in Caledonia Mining Corporation (LSE: CMCL). At current prices the mining giant trades on a P/E ratio of below 9 times for 2020. It carries a tasty 2.5% dividend yield too.
Another great safe haven
Buying into defence stocks would also be a good idea right about now. The resilient nature of defence spending means that such shares will likely prove more resilient than most during the upcoming global downturn.
One great UK-listed defence play to buy today is Ultra Electronics (LSE: ULE). It advised in a trading statement last week that “trading remains broadly in line with expectations and despite the challenging environment, we continue to expect 2020 to be a year of good progress.” The world isn’t getting any safer and so its cutting-edge Tier 2 and Tier 3 technologies should remain strong, regardless of what economic pressures materialise.
In particular, Ultra Electronics’ strong relationship with the US Department of Defense (DoD) should underpin demand and safeguard sales. More than 60% of group revenues are generated in North America, with the DoD alone accounting for a quarter. US arms spending continued to balloon in 2019, according to the Stockholm Peace Institute. Spending is likely to keep growing amid what the organisation terms “a perceived return to competition between the great powers.”
City analysts certainly expect annual earnings at Ultra Electronics to keep rising over the medium term at least. This leaves the FTSE 250 safe haven trading on an undemanding forward P/E ratio of 15 times. A chunky 3% dividend yield for 2020 sweetens the investment case too.
