Gold’s role as the ultimate safe-haven has come to the fore again in early 2020. Its surge to seven-year peaks around $1,600 per ounce was impressive, but at the same time not unexpected.
Tensions between the US and Iran may have proved the spark, though a policy of loose monetary policy by global central banks, allied with concerns over the next phase of trade talks between Chinese and American lawmakers, also drove flight-to-safety interest in the eternal metal and continues to do so.
I’ve argued that the tense macroeconomic and geopolitical landscape will lead to more mighty gold price gains this year. This is despite prices cooling and falling back towards the $1,550 per ounce marker more recently.
Still, the performance of gold could well be put in the shade by another commodity class in 2020: the platinum group metals (or PGMs). Indeed, while the yellow metal has taken a step back, prices of these assets continue to rip higher.
Record-breaking palladium keeps on going
Take palladium, for example. This dual-role metal gives investors the best of both worlds, its position as both investment and industrial material has seen it rising on the back of safe-haven buying, as well as hopes of a breakthrough in the US-Chinese trade impasse.
While gold rose an impressive 22% in value over the past 12 months palladium’s gains have been even greater. It’s up over 80% over the period and has just struck new record peaks, around $2,580 per ounce.
Lease rates have boomed in recent days as buyers scramble to secure metal for immediate delivery, so great are fears over palladium shortages. And don’t expect this to be a flash in the pan either. Greater environmental standards mean that demand from the car sector to clean up exhaust emissions should keep on rising. Meanwhile, a lack of new mine projects casts doubt on where this metal will come from.
So how can investors ride the booming palladium price, you may ask. How about buying the physical metal itself, or a palladium-backed ETF which track price movements? Not for me, I’m afraid. I’d rather buy shares in a dedicated PGM producer like Sylvania Platinum (LSE: SLP).
This is an AIM stock which has surged 120% in value over the past 12 months, and yet is one that still appears grossly undervalued by the market. For the fiscal year ending June 2020, it boasts a rock-bottom P/E ratio of below 5 times, created by predictions of an 83% profits surge.
This isn’t the only reason why Sylvania Platinum is a better buy though. Getting exposure to rising metal prices gives investors the chance to latch on to big dividends. And Sylvania’s is an absolute doozy as it carries a monster 5.1% forward yield.
But Sylvania ain’t just a great play on palladium prices, of course. Other PGMs, like rhodium (up 200% in 12 months) and platinum (up 27%), are also on the charge on the same supply and demand considerations. All things considered, I reckon Sylvania could prove to best the hottest commodities play this year.
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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.