In periods of extreme market volatility such as these, it’s good to have a portion of your investment portfolio dedicated to safe-haven assets. Both the dollar and precious metals, for example, have spiked in recent sessions as the sell-off in global stock markets has revved up again.
Let’s take a look at gold. After starting October below the $1,200 per ounce milestone it’s gained almost 50 bucks and, as I wrote this was dealing just short of $1,235. Silver has enjoyed something of a renaissance as well, the metal advancing 20 cents since the beginning of the month to around $14.75 per ounce.
The rapid deterioration in risk appetite has seen investors of all shapes and sizes pile into the precious metals complex with gusto. Indeed, physical gold and silver trader The Pure Gold Company announced today that sales of its bars and coins have exploded 347% in October, and that three-quarters of its buyers have never bought into bullion before.
Room for more gains? Not everyone believes that conditions remain supportive enough for gold to continue its recent northwards charge however.
UBS, for example, commented earlier this week that “we expect further US dollar strength combined with a stabilisation and a rebound in US equities. Recent hawkish statements by the US Federal Reserve suggest a December rate hike is still in the cards.” And the broker believes that “these dynamics will make it tough for gold to hold on to recent gains in the short run.”
UBS did add that “for prices to rise further, risk sentiment needs to deteriorate further.” It is fair to say — at least in my opinion — that a further plunge in investor sentiment has already started, with recent stock market corrections worsening across the globe.
There’s plenty of reason to expect market confidence to keep tumbling. As The Pure Gold Company noted of its more recent customers: “Some of them mention the 2008 crash as a sobering comparison to what they fear might happen in the future – counter-party risk and institutional collapse influenced by Brexit uncertainty, trade wars and protracted geopolitical concerns.” In this macroeconomic and geopolitical climate there is clearly much more room for gold to charge in the near term and beyond.
A FTSE 100 dividend dynamo Buying into precious metals directly isn’t the best way for cautious investors to get exposure to the safe-haven assets, however. Indeed, I’d be much happier to buy into Randgold Resources (LON:RRS) (LSE: RRS), a share whose price has boomed almost 20% since the turn of October.
I recently lauded the brilliant profits opportunities afforded by its mega-merger with Barrick Gold, but I’ve long been a fan of FTSE 100 company owing to the stable outlook for gold prices and the steps it is taking to turbocharge production from its African assets. Its inflation-busting dividend yields of 3.1% and 4.2% for 2018 and 2019 respectively also make it a preferable purchase to non-yielding bars of gold, in my opinion.
Don’t get me wrong, I still believe that stock investing is the best way for long-term savers to put their money to work despite the current turbulence. But there remains plenty of scope for gold, and with it the likes of Randgold, to thrive now and in the years ahead.
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.