Concerned about another stock market crash? I reckon buying into London’s precious metals miners is an excellent idea as macroeconomic and geopolitical jitters worsen.
Why not do this by buying into Serabi Gold (LSE: SRB)? A forward price-to-earnings (P/E) ratio of below 5 times suggests great value for money given its potential to deliver exceptional profits growth over the next couple of years. A 227% bottom-line rise is forecasted for 2020 alone by City analysts.
Gold investment keeps on soaring
Strong gold prices are one reason to expect earnings at Serabi Gold to ignite. Share markets continue to edge higher but investor confidence remains fragile. And so interest in flight-to-safety assets keeps growing too. Latest data from the World Gold Council shows that global holdings of bullion-backed exchange-traded funds (or ETFs) leapt again in May. That’s because Covid-19-related fears, crashing US-Chinese diplomatic relations, and escalating concerns over more central bank money-pumping boosted demand for the hard currency.
According to the council, ETFs from across the globe added an extra 154 tonnes of material in May. As a consequence, total holdings hit a new record of 3,510 tonnes. Furthermore, gold inflows during the first five months of 2020 clocked in at 623 tonnes. This took out the all-time high for annual inflows back in 2009. That came in at 591 tonnes.
This is a perfect indication that the coming economic downturn threatens to dwarf the recession of a decade ago. Many are predicting the worst global recession since the Great Depression of the 1930s.
A hedge against another stock market crash
As I say, however, the likelihood of strong safe-haven gold buying is only one reason to buy Serabi Gold today. It’s also making splendid progress on the production front and, in March, dug 3,700 ounces of the yellow metal out of the Brazilian ground. This was the highest monthly amount on record, according to mid-April’s latest operational update. This was down, in large part, to improved ore grades.
Meanwhile, the AIM-quoted company is also making terrific progress on the exploration front. Drilling work at the Sao Chico orebody at the Palito Complex in north-east Brazil, for example, has continued strongly since the start of 2020 and revealed some remarkable intercepts. One particular hole, 19-SCUD-333, has revealed a gold grade of 25.37g/t over a width of 4.08 metres.
Serabi Gold noted: “An intersection of this quality provides us with strong encouragement of continuity of the Sao Chico orebody at depth and therefore potential further resource growth and extended life of the operation.”
Serabi Gold’s share price has rocketed more than 30% so far in 2020. But, clearly, the metal producer offers significant investment potential beyond the near-to-medium term and offers more than just protection against another stock market crash.
This is one safe-haven stock I think is worth piling into and holding for years to come. Particularly so at current rock-bottom prices.
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.