Risk appetite for UK-focussed stocks has received a real shock since the December 12 general election. The housebuilders, for instance, have ballooned in value since then as confidence has returned to the market. But I can’t help but fear that this leaves plenty of London’s recent risers in danger of falling later on.
‘No deal’ Brexit will be avoided on 31 January, but it could still happen at the end of the year. Should lawmakers in London and Brussels fail to strike a trade deal by 11.59pm on 31 December, then a disorderly withdrawal be the only option.
Legislation is about to be passed in Westminster to make this official. And the time window in which to get a deal over the line has become a little bit smaller this week, with the European Commission confirming that trade talks won’t begin until “the end of February [or] beginning of March.”
Record gold?
The uncertainty that has hobbled the UK economy has been punted a few months down the line rather than being zapped out of existence. It pays, then, for stock investors to have a trick or two up their sleeves as insurance against further turbulence.
Having exposure to precious metals is a sound way to achieve this. They are a timeless safe-haven in worrying geopolitical and macroeconomic times. Gold’s early January charge to seven-year highs just shy of $1,600 per ounce illustrated this perfectly. And there’s plenty out there who believe more multi-year peaks could be within grasp.
One of the boffins over at Bridgewater, for instance, believes that gold will even strike fresh record peaks. Greg Jensen, co-chief investment officer of the planet’s largest hedge fund, speculated to the Financial Times last week that bullion could charge above $2,000 per ounce in the current climate. The all-time record sits around $1,920 and dates back to the summer of 2011.
Too good at these prices!
That said, Brexit isn’t the only reason you can be confident of a rising gold price in 2020. As Jensen notes, an environment of low central bank interest rates and subsequent inflation concerns should support bullion values this year. And growing tensions between the US and Iran, and the US and China should also drive buying activity.
Even though I’m bullish on gold over the short to medium term (at least), I wouldn’t buy the physical metal itself. I’d rather buy shares in a couple of big-yielding bullion producers itself. Here investors can ride any rises in the metal price itself and capitalise on booming production rate, too.
Take Petropavlovsk, for example. Total gold sales here rocketed by 24% in the nine months to September, illustrating the brilliant potential of its POX Hub as well as ore processing upgrades elsewhere. It’s why the number crunchers expect annual profits to boom 158% in 2020, leaving it trading on a price-to-earnings multiple of 4.4 times.
Russia-focussed Petropavlovsk’s share price boomed 98% in 2019. And that low, low rating leaves plenty of space for more whopping gains in the near term at least. I’d very happily buy it for my ISA today.