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Summary
- The demand for precious metals as an alternative investment avenue, in the wake of the acute economic downturn, has risen over the past five months
- Profit booking on these asset classes was long overdue, with most of the technical parameters indicating towards an impending correction
- There are experts who view the prices of both gold and silver to rise again after this round of corrections
Prices of precious metal gold and silver fell sharply after peaking in the first week of August. This correction which was long overdue came after a gradual rise that has been witnessed since the last week of March when the UK went into lockdown. Precious metals were among the very few asset classes which saw a steady increase in demand as most others saw a sharp fall in prices, amidst a colossal crash in the stock and the crude oil markets during that period. However, since the news broke of the launch of a successful coronavirus vaccine in Russia, and an intense possibility of another successful vaccine launch next month in the UK, the speculative interest in both the metals showed a sharp decline. Experts, however, believe that the correction is temporary as the news of the vaccine launch will not lead to an immediate change in the macroeconomic landscape of the world which has been deeply battered in the past few months.
Has the gold and silver prices rallied since March when the Lockdown was imposed in the UK?
On 20 March 2020 prices of gold were hovering around £1264.36 per ounce, on 23 March when the lockdown was announced the prices registered a sharp rise of 9.20 per cent to £1381.75 per ounce. Since then the prices had moved up steadily and reached a peak of £1563.89 per ounce on 10 August 2020 before the current correction took place. Similarly, in the case of silver, the prices of the metal were hovering at £10.25 per ounce on 19 March 2020 and registered a sharp increase of 20 per cent in the next one week to reach £12.31 per ounce on 25 March; two days after the lockdown was announced. Since then the prices have increased steadily to reach a peak of £22.23 per ounce on 10 August 2020 before entering into a correction phase.
What importance does Gold and silver hold as alternative asset classes in times of crisis?
Over the past few decades, both these bullion metals have been used extensively by investors as an alternative investment asset to hedge the risks arising out of the equity markets. Their ready acceptability as payments in lieu of currency has made them a favourite among investors, especially gold which has wider importance from the central bank’s point of view to create reserves to protect against situations like a large financial crisis or a major natural disaster type event like the current coronavirus pandemic.
Let us discuss four precious metal stocks whose fundamentals remain firm despite correction
- Centamin Plc (LON:CEY) The shares of the company have been on an upmove since the past one month, it was trading at GBX 191.50 on 13 July 2020, and rose to reach a peak of GBX 232.10 on 5 August 2020 before correcting to around GBX 204.00 as on 12 August 2020 at 11:52 AM GMT.
Centamin Plc is a United Kingdom Registered gold mining company that specialises into exploration and development of minerals. The shares of the company are listed on the London Stock Exchange as well as the Toronto Stock Exchange. The company owns Sukari Gold Mine in Egypt with a current production capacity of 500,000 ounces per annum.
- Petropavlovsk Plc (LON:POG) – Petropavlovsk plc has been performing in the positive zone on the London Stock Exchange over the past one month. The shares of the company were trading at GBX 29.40 on 13 July 2020, after which it rose to reach a high of GBX 39.80 on 29 July 2020 before correcting to around GBX 32.20 as on 12 August 2020 at 11:53 AM GMT.
Petropavlovsk is a Russian gold mining company with mining leases located in the far east of the country and is one of the largest gold mining and production companies in that country in terms of its scale of operations, production, reserves it holds and overall resources it owns. The shares of the company are listed on the London Stock Exchange also form part of the FTSE 250 index.
- Polymetal International PLC (LON:POLY) – The shares of Polymetal international have been performing well over the past month on the London Stock Exchange. The stocks of the company were trading at GBX 1,613.00 on 13 July 2020, and from there they rose to reach to a one month high of GBX 2,050.00 on 5 August 2020 before correcting to around GBX 1947.00 as on 12 August 2020 at 11:54 AM GMT.
This company is based out of Cyprus and has a mining and production interest in both gold and silver. The company’s assets though are located in Kazakhstan and Russia, where it enjoys a low-cost base and a similar cost of production. The company figures amongst the largest producers of gold in Russia. The shares of the company are listed both on the London Stock Exchange and the Moscow Stock Exchange.
- Fresnillo PLC (LON:FRES) – Fresnillo Plc is among the high performing gold production companies on the London Stock Exchange over the past one month. Its shares were trading at GBX 992.80 on 13 July 2020, and from there they rose to a high of GBX 1340.00 on 5 August 2020 before correcting to around GBX 1226.50 as on 12 August 2020 at 11:55 AM GMT.
Fresnillo is a Mexico based precious metal producer and is primarily interested in gold and silver. The company owns seven mining licenses in Mexico, out of which two are in the production phase, two are in the exploration phase and the rest three in development phase. The shares of the company are listed, and trade on the London Stock Exchange since 2008 and they also form part of the FTSE 100 index.
