Having exposure to gold, either by holding the metal directly, buying into a gold-backed financial instrument like an exchange-traded fund (or ETF), or snapping up shares in precious metals producers, is always a good idea.
At some time in your life, your investments will experience some severe volatility owing to natural cyclicity in the global economy, not to mention standalone macroeconomic or geopolitical events which can smack market sentiment and drive demand for flight-to-safety assets. And gold is a natural hedge against these eventualities. Its role as a popular safe-haven in turbulent times as strong now as it was centuries ago.
As a betting man (low-stakes poker, if you ask) I’d wager that gold could be about to surge again as we move towards 2020. Key economic indicators are only getting worse. Hot political issues like President Trump’s impeachment enquiry, US-Sino trade wars, and the Brexit saga look set to drag on for longer. Meanwhile, political turbulence in the Middle East is increasing, and central banks look set to keep slashing interest rates like there’s no tomorrow.
But don’t just take my word of it. There’s an entire legion of brokers and commentators out there predicting good things for the gold price in 2020, the latest of which came from the London Bullion Market Association (LBMA) at its annual precious metals conference in Shenzhen, China, this week. According to the boffins, bullion prices will be sitting above $1,650 per ounce next October, up from recent prices around the $1,480 mark.
Sure, gold may have tracked back below the psychologically- and technically-critical threshold of $1,500 per ounce again in recent sessions. But this is no surprise given the metal’s meteoric ascent in 2019 and the temptation for investors to take profits (gold prices still remain 15% more expensive from levels at the turn of January in spite of recent selling). The outlook for metal values in the near-term and beyond remains quite rosy.
As I say, there’s a multitude of ways to play the metal price though, in my opinion, buying gold-digging companies is the best way to do that, either by buying individual shares themselves or by buying an ETF containing a basket of mining firms. Why? The added bonus of dividend payments, that’s why.
One particular share I think is a top buy today is Polymetal International. This FTSE 100 digger carries monster dividend yields of 4.1% and 5% for 2019 and 2020, respectively. And thanks to its ultra-low rating — a forward P/E ratio of 12.8 times — it has plenty of scope to rise in the coming months and beyond.
Oh, and one final thing which makes the resources giant a great buy right now. Polymetal is slated to release third-quarter production results on 24 October. Given the rate at which output has been booming across its Russian assets of late, I reckon this release could give the digger’s share price a hefty nudge in the right direction.
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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.