There’s plenty of macroeconomic and geopolitical-related fear going around at the moment which is keeping gold demand bubbling quite nicely. It’s why bullion prices remain stable at around the $1,300 per ounce marker and investment demand for the safe-haven metal going from strength-to-strength.
A recent report from the World Gold Council (WGC) shows just how rapidly demand for the precious commodity has ballooned since 2016 and, in particular, how this has propelled inflows into European gold-backed exchange traded funds (ETFs).
According to the WGC, total assets in these continental investment vehicles hit tops of 1,121.4 tonnes in the first quarter of 2019. The body believes there’s plenty of reasons to expect investor interest to remain solid, including loose monetary policy and negative yields, political uncertainty across the continent, and lagging equity market performance on European share bourses versus the rest of the West.
The council said that “it’s likely these factors will underpin demand in 2019 and beyond,” though there’s ample rocket fuel to drive inflows in ETFs in other parts of the world to rise as well, like cooling economic growth in Asia and fears over trade talks between the US and China and the European Union.
Could it be a good time, then, to stash the cash in gold producer Polymetal International (LSE: POLY) then? I think so, and particularly in light of its cheap valuation, the FTSE 250 firm sporting a forward P/E ratio of just 9.6 times.
Such a low rating could give the Russian digger and its share price even more scope to jump in the months ahead should, as I fully expect, bullion prices keep on bulging as we move through 2019. What’s more, Polymetal’s gigantic dividend yields, which currently sit at 5.2% and 5.6% for this year and next respectively, could have the same positive effect on buyer appetite.
I believe the combination of low multiples and big yields could propel the Persimmon (LSE: PSN) share price, which already gained 12% in the first quarter of 2019, to the stars in the months ahead too.
Right now, the FTSE 100 company carries a forward P/E multiple of just 8.3 times and also boasts monster dividend yields of 10% through to the close of 2020. I would consider this rating to be far too cheap given the favourable conditions in the homes market that leads City analysts to predict solid earnings growth at the housebuilder through the next couple of years at least.
Latest data on first-time buyer mortgage activity released by UK Finance last week shows just how robust the trading environment remains for the likes of Persimmon, the body announcing that the number of mortgages approved for new buyers in February rose 4.2% year-on-year to 24,880. This was the fifth straight month of increases and there’s no reason to expect this trend to reverse any time soon, given the favourable lending environment and the support given by the government’s Help To Buy purchase scheme. For this reason I believe Persimmon, like Polymetal, is a great income share to load up on today.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.