I fancy doing some last-minute stocks shopping before markets close down for Christmas. Here are two top penny stocks I’m thinking of buying.
Riding the copper demand boom!
Escalating trouble in the Chinese property market poses a threat for many UK commodities shares. Profits could take a tumble if the problems faced by Evergrande spread and demand for metals, for example, slumps. Still, as someone who buys share with a long-term view I think copper shares like Phoenix Copper (LSE: PXC) remain ultra-attractive right now.
It looks as if copper demand is set to explode over the next decade. This isn’t just because rising concerns over climate change should supercharge electric vehicle sales and investment in renewable energy technology. It’s because demand for consumer electronics looks set to rocket in emerging markets as personal wealth levels increase.
Bank of America recently tipped copper to hit $20,000 a tonne by 2025 as copper shortages emerge. That’s up from just below $9,300 today. Phoenix Copper is due to restart production at the Empire Mine in Idaho in 2022 to capitalise on improving red metal consumption.
A word of warning: a swathe of new production capacity entering the market could harm the prices UK shares like this can ask for their metal. Analysts at ING Bank recently warned that “the expansion of some Chinese players such as Daye and some new projects in Indonesia and India” could keep refined supply high over the next few years.
Another top penny stock for commodity lovers
Phoenix Copper isn’t the only dirt-cheap commodities stock I’m considering buying today. An environment of soaring prices means I’m also thinking of investing in Scotgold Resources (LSE: SGZ). This is because I think inflationary pressures could increase at an alarming rate, in turn boosting classic safe-haven assets like gold.
The Bank of England decision last week to raise rates despite the worsening Omicron crisis illustrates how seriously the inflationary threat is becoming. Deutsche Bank analysts upgraded their inflation forecasts in recent hours (they now expect British CPI to exceed 6% next spring). This comes after UK inflation hit new 10-year highs in November and beat broker forecasts by around half a percentage point. Plenty of other economists are rethinking their global inflation targets following recent data.
It’s true that rate hikes by central banks could hit gold demand and by extension profits at Scotgold. This could be particularly damaging if the US Federal Reserve engages in regular rate hiking, a trend that would likely push the US dollar higher. This could damage investor interest in gold as it would make dollar-traded commodities like this less cost effective to buy.
But it’s my opinion that banks will be reluctant to raise rates too much as the pandemic rolls on, keeping the inflationary bubble going. Scotgold operates the Cononish gold mine in Scotland where production is steadily being ramped up.
