Loss-making miner Greatland Gold (LSE:GGP) has jumped nearly 20% and the share price is trading at levels not seen since March 2019.
Concerns over the coronavirus outbreak in China have roiled markets across the globe and with the yuan sinking, multinationals have seen their share prices tank. As I write, the S&P 500 is down by its largest amount in four months and the FTSE 100 has slid by more than 2%.
When stocks are tumbling, investors tend to flock towards traditional safe havens like gold. The spot price of the precious metal has climbed above £1,200 per ounce, approaching its 12-month high seen back in September 2019.
Commodities like gold and silver remain popular with investors who want to diversify away from stocks and shares, but they can leave you exposed to wide price swings.
Going for gold
The Australia-focused miner has some of its largest projects in the Yilgarn Craton, a famed area in the west of the country that produces two-thirds of Australia’s gold.
And news out on 21 January suggested the company’s 100%-owned Firetower East diamond drilling project had produced positive results. “By confirming continuity of mineralisation over an extensive strike length of more than 200m, we have successfully moved the project up the value curve,” chief executive Gervaise Hiddle told the market.
So is AIM-listed Greatland Gold a good place to invest, not just now but for the long term?
I’m not so sure. First of all, the company is right at the bottom of the market cap I’m comfortable buying, at just over £100m.
Secondly, a chart of the GGP share price in recent months shows steep peak and troughs, suggesting investors are taking profits frequently, as soon as the shares hit a certain level.
That says to me that there’s a lack of long-term support for the stock and it’s an investment that’s fraught with danger.
Thirdly, there appears to be no obvious news underpinning the massive 20% share price hike, other than global market concerns and a flight to safe havens. You could well be coming in right at the top, and when the dust has settled, you may be left with an investment that’s worth a lot less than you paid for it.
If I wanted to add some gold exposure to my Stocks and Shares ISA portfolio, I would bypass riskier individual mining shares and look instead to an ETC (exchange-traded commodity) to provide wider diversification. The iShares Physical Gold (LSE:SLGN) fund is an ETC that would be near the top of my list.
The bottom line
I’d also suggest that you can make more money over the long run by ignoring short-term peaks and troughs in the market and instead focus on drip-feeding funds into your Stocks and Shares ISA.
Making smart plays on profitable, fast-growing FTSE 250 companies like Games Workshop or compounding your way to wealth with the strongest FTSE 100 firms like Aviva or Legal & General will still provide a better future for you and your portfolio, in my opinion.
Tom Rodgers has no position in 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.