UK share investors like me have a lot to think about as we move into 2021. In particular, we need to be cautious as the Covid-19 infection rates worsen and new lockdowns come into effect.
Exposure to gold could be considered a must-have for UK share investors in these uncertain times. Sales data from bullion retailer The Pure Gold Company reveals how strongly safe-haven demand for precious metals has gone up recently. Demand has rocketed 264% over the past seven days as Tier 4 restrictions have been rolled out.
Gold to hit $3k?
Yellow metal prices reversed sharply from their record highs north of $2,000 per ounce struck in August. But they hit key technical levels recently at around $1,910, suggesting another breakout could be imminent. Indeed, a recent survey from Kitco suggests that a rush to new peaks is a strong possibility in 2021.
The report indicates that analysts think “inflation, [a] weaker US dollar, economic concerns, currency debasement fears, and low interest rates” could be key. Kitco metals global trading director Peter Hug reckons that new record peaks around $3,000 per ounce could be hit next year.
Even a sharp rebound in the global economy could help lift gold prices next year, Hug says. He adds: “If you take the optimistic side and imagine that many people do get vaccinated and the vaccine works, then the economy should take off in a serious way in the second half of next year. The inflationary scenario becomes a real possibility, which is positive for metals.”
Riding gold with UK shares
I think all of this means that Trans-Siberian Gold (LSE: TSG) could be one of the best UK shares to buy for 2021. As the name suggests, the business is focused on hauling gold out of the ground in Russia. Its Asacha mine is located in the country’s eastern South Kamchatka area, a place that’s world famous for its high-grade gold deposits.
The quality of Trans-Siberian’s assets has underpinned some terrific production updates in 2020. And the AIM-quoted share was at it again last week, giving it terrific momentum moving into 2021. Strong output in the first 11 months of the year (of 40,297 ounces) prompted it to raise its estimates for the new year to 44,000 and 45,000 ounces. It had previously pencilled in output of 38,000 to 42,000 ounces.
Soaring production and a solid outlook for gold prices feed through to some impressive earnings forecasts for 2021. City brokers reckon Trans-Siberian’s bottom line will bulge 18% next year. And this leaves the UK share dealing on a cut-price forward price-to-earnings (P/E) ratio of 6 times.
I believe that buying UK shares is a better way than buying bars, coins, or gold-backed exchange-traded funds to ride the bullion price. Doing so offers investors the chance to receive dividends in the process. And Trans-Siberian is an attractive target in this respect. Its yield for next year sits at a chunky 2.2%. All things considered, I think this gold digger is a brilliant value buy for these uncertain times.
