The upturn in the price of gold in 2020 has been nothing short of impressive. The sharp recent rise in risk aversion among investors meant that the safest haven of them all suddenly saw a huge upturn in demand. As a result, the gold price hit record highs. With the economy still quite weak, I think it’s possible that gold demand will remain elevated for the foreseeable future. There are even forecasts of a doubling in gold price in the next few years.
To ride the gold wave, I always like the idea of buying exchange-traded funds (ETFs) but I think there are some FTSE gold mining shares as well that can make good investments. It’s no coincidence that shares of gold miners have been rallying in recent months, and can continue to be a good hedge against any future stock market crashes.
Best UK shares to buy as gold price rises
One of them is the FTSE 100 precious metals miner Polymetal International, whose share price had risen by 36% in July from the start of 2020. Its upbeat trading update is likely to further buoy the share price. It reports a 30% increase in revenue on the back of rising gold prices and increased sales volume. I like that POLY has been a financially robust company even before gold came into focus recently. It also pays a dividend, with a 3.7% yield. And its price-to-earnings (P/E) hasn’t run away either, but is still at a relatively muted 19 times.
Another investing option is the FTSE 250-listed Centamin Mining, whose share price touched an all-time high in the recent gold price run up. As a result, its earning ratio is higher (and less attractive) than POLY’s now, at 27 times. It’s also less consistent from a financial performance perspective, though I think at least this year will be a good one for it. It does have a higher dividend yield of 4.9%, making it an attractive investment for those looking to generate a passive income while the asset value rises too.
A smaller listed gold miner is Highland Gold Mining, with operations in Russia and Kyrgyzstan. It sounds less upbeat in its latest production update than CEY, but HGM’s share price has also run up quite a bit. I reckon it has still far more room to increase, going by its earnings ratio of 6 times. It too pays a dividend, with a yield of 2.4%. Analysts are positive on the stock as well.
The takeaway
I think all these stocks are good to buy, and if you are really keen on gold, having all three in the portfolio is worth considering as well. While the HGM share price could run up from here, going by this initial analysis, CEY has the best passive returns on investment even after the sharp increase in its share price and POLY is the most stable investment going by its size and financial performance. I think the investor has much choice here.
