Has there been a better time to have exposure to gold than right now? Certainly not in recent years, as far as I’m concerned.
All indicators seem to be pointing to a brand new bull run and UBS for one has been scaling up its price forecasts in the past few hours. For 2019, the bank’s improved its average estimate to $1,370 per ounce, from $1,325 previously, while it’s been boosting its figures through the next few years as well — a mean of $1,450 is anticipated for 2020 and $1,500 for 2021.
Bullion values have surged by $100 per ounce over the past month alone and are now banging on the door of the critical $1,400 level. That advance would likely prompt further rounds of significant buying. And who would bet against such a scenario in the current climate?
A perfect picture for safe havens
We seem to be entering a perfect storm for precious metal prices right now. Most prescient in investor minds might be the escalating political and military crisis in the Middle East, one which has worsened following Tehran’s downing of a US drone and subsequent cyber attacks from the Pentagon on Iranian missile installations.
Unsurprisingly, the conflict in the region has had a cataclysmic impact on oil prices too, another driver for gold on the back of increased inflationary fears. Brent broke back through the $65 per barrel marker late last week, and while there remains some uncertainty over this run given ongoing supply and demand concerns, there’s no reason to dismiss some more punchy gains in the short term.
The other main driver for gold prices of late has been the growing expectation of some serious central bank rate cutting, driven by a steady deterioration in economic indicators across the globe, as well as the possibility of President Trump’s trade wars dragging on for some time.
The prospect of fresh Federal Reserve rate slashes adds another string to gold’s bow, namely the likelihood of more pressure on the US dollar, a situation that makes it cheaper to load up on the greenback-denominated asset.
Take the High road
There’s no shortage of brilliant miners to buy on the London markets today, though those seeking to capitalise on a possible gold price run and who also have a penchant for big dividends may want to give Highland Gold Mining (LSE: HGM) a close look.
Don’t think booming bullion is the only reason to buy into Highland right now, though. It’s also growing gold production at an electrifying pace and, during the last quarter, total output rose 21% year-on-year to a mega 71,961 ounces.
This mining giant’s share price is trading at record highs above 200p per share on the back of those renewed gold prices and yet, as I type, it still provides exceptional value for money. As well as boasting a sub-10 forward P/E ratio, Highland also trumpets a whopping 6.6% corresponding dividend yield at current prices, too.
If you’re looking to get some exposure to precious metals right now, then this AIM hero is worth serious attention right now. I’m seriously considering snapping it up in anticipation of some more serious share price rises in July, and probably beyond too.
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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.