UK share markets have continued their northwards march as hopes of a Covid-19 breakthrough rise. The FTSE 100 has just hit its highest levels since early March. The FTSE 250 is doing even better and was recently sitting at nine-and-a-half-month peaks.
Is it too early to claim that the global economy has turned the corner, though? I think so. Soaring Covid-19 infection rates suggest that a strong and sustained recovery could remain elusive. Reams of economic data streaming in from North America and Europe suggest that the rebound is likely to be lumpy too.
I wouldn’t be surprised to see a sharp reversal in UK share prices before long. In my opinion investors need to be prepared for a a long economic hangover following the coronavirus crisis.
Riding the gold train with UK shares
Having exposure to gold remains a great idea, then. And I’d do this by buying UK shares. This often allows investors to ride any rise in the precious metal price while receiving dividends in the process.
Concerns over the macroeconomic and geopolitical landscape remain and could give gold prices a big shunt higher again in the coming months. Irrespective of this, however, I think gold should remain well bought as ultra-loose monetary policy fans inflationary fears during this new decade and pushes interest in so-called hard currencies like gold.
News yesterday that just 245,000 new jobs were created in the US in November has raised gold’s appeal even more. It’s fanned fears that the world’s largest economy is faltering again (610,000 jobs were made back in October). And it’s raised the possibility that the US Federal Reserve might come to the rescue again with more quantitative easing, raising existing inflationary concerns still further.
The gold standard?
I’d consider buying Scotgold Resources (LSE: SGZ) shares to ride the solid gold price outlook. But I’d also buy this UK share as production at its high-grade and low-cost Cononish mine in Scotland begins. The business will produce 9,910 ounces of gold in 2021 under phase 1 conditions, a figure that will blast to 23,500 when phase 2 begins in May 2022.
The mining sector is fraught with risks for investors. The spectre of project delays, disappointing payloads, and unexpected costs is part and parcel of buying UK shares like Scotgold. But on the plus side this particular digger has the financing in place to get phase 2 off the ground. And it also ha option agreements to explore 3,000 square kilometres of the Grampian Terrane in central Scotland. This area is thought to contain significant gold deposits.
Scotgold’s share price has rocketed 64% in 2020 on the rampant gold price and a series of bright exploration and project development updates. And I think it could continue to soar in the years ahead. This is one UK share I’d happily buy for my Stocks and Shares ISA today and hold for years.