UK Gold Miners – Are They the Perfect Hedge Within the Equity Markets?

  • Jul 17, 2020 BST
  • Team Kalkine
UK Gold Miners – Are They the Perfect Hedge Within the Equity Markets?

Summary

  • Gold stocks are considered as safe heavens, and the gold investments have been the cream of the crop in the recent times
  • The growing demand for gold has put the UK gold miners in the driver’s seat
  • Lots of gold mining stocks have yielded double-digit returns in recent times

The LSE listed Gold Miners’ stocks are often seen to be benefiting from the rise in gold prices, while supported by the strong fundamentals. At times, when the equity markets are losing their shine, with FTSE 100 falling by nearly 18 per cent since the start of the year, the UK gold miners seem to be presenting a better hedge against inflation and are expected to be in correlation with the underlying asset. However, it is also true that the price of gold as a commodity might not always resonate with the prices of gold miners.

Amid the unprecedented crisis caused by the pandemic, the price of gold was hovering marginally above US$1,800 per ounce mark (on 17 July, while writing at GMT 7:58 AM). The horizon of the gold as the ultimate haven under the current turmoil induced by the novel coronavirus has heightened the momentum in the global commodity. The price of gold had hit a fresh 1-month high from June. Gold has recently struck 8 years high this month, in contrast to the Gold prices in November 2012. The precious metal has delivered a price return of nearly 15 per cent on Year to Date (YTD) basis.

Also read: Gold Miners Emerge as Safe Havens for the Investors During the Coronavirus Crisis

The coronavirus outbreak has further escalated the uncertainty in the market, which in combination with the weakened US dollar has pushed the gold to trade in the record ranges. Amidst the market turmoil and as the equity markets plummets, the UK bond yields are already on the floor.

The sudden spike in the coronavirus cases in the United States and the Asia Pacific region coupled with the gloomy economic outlook from the US Federal Reserve had sent jitters to the global stock markets fearing a second wave of the novel coronavirus. The US dollar has already weakened due to lesser interest rates prevailing in the economy. According to industry experts, the uncertainty in the short term would continue to prevail due to lack of clarity on exit strategies and policy paralysis in terms of implementing social distancing in conventional businesses and economic activities throughout the United Kingdom.

The FTSE 100 index has witnessed good gains (nearly 25 per cent since lockdown) with recovery majorly coming from the several stimulus packages announced by the British government to safeguard the economy against the pandemic, but the duration of the strength is difficult to gauge as the uncertainties and risk of the second wave of the pandemic continues to mount more pressure on the UK’s economy.

Also read: Five gold stocks on the LSE amidst the Coronavirus scare

Gold has become the cream of the crop in the recent times in terms of investment options, and the UK Gold Miners could be looked for in the current market as the London’s broader benchmark equity index, FTSE 100, or Footsie, has lost over 18 per cent since the start of the calendar year 2020. The stimulus packages announced by the British government and the transient relief they provide could only be assessed in the long term. A lot of uncertainties due to this unprecedented crisis are hovering around the UK’s economy.

The growing demand for gold has put the UK gold miners in the driver’s seat. The growing strength in the gold prices in combination to the weaker US dollar could drive revenue streams for gold miners in the United Kingdom.

Gold has traditionally been a store of value, which could be accessed in the moment of crisis. However, a segment of the population also sees it as a vehicle for investment. As a matter of fact, Gold tends to enjoy the sorts of pressures which are prevalent in the economy today. It has been a preferred choice to park surplus funds by the investors.

UK Gold miners are the perfect blend of the two-asset class promising highest return opportunities even during the situations like those prevailing currently. Let us run a lens through some of the top picks among UK Gold miners.

  • SolGold Plc (LON: SOLG)

Australian company, SolGold Plc is into mineral exploration with interests in the discovery and exploration of gold and copper mineralization. The company has deep assets in Ecuador. The company has recently commenced the acquisition of Canada based miner, Cornerstone Capital Resources Inc. Both companies were jointly involved in the development of Alpala copper-gold project. In addition, the company has commenced regional exploration activities in Ecuador.

Since the pandemic severely impacted the UK stock markets in the mid of March this year, the shares of the company made a low of GBX 11.22 on 16 March 2020. The stock price closed at GBX 22.10 on July 16. In a period of four months, the stock has delivered a price return of 96.77 per cent, nearly double.

On 17 July 2020, at the time of writing the report (before the market close, GMT 8:24 AM+1), SolGold Plc shares were trading on the London Stock Exchange at GBX 22.30 up by 0.91 per cent from the previous day closing price.

 

  • Greatland Gold Plc (LON: GGP)

Greatland Gold Plc is a gold mineral exploration and mining company headquartered in London. The company is currently progressing with its exploration plans in the Paterson region (Australia) and have the opportunity to consolidate its strategic position in the highly prospective region. The company is well poised to accelerate with the ongoing projects as it had £6 million in cash as of 30 June 2020.

Since the pandemic severely impacted the UK stock markets in the mid of March this year, the shares of the company had made a low of GBX 3.13 on 18th March 2020. The stock price closed at GBX 12.30 on 16 July 2020. In a period of four months, the stock has delivered a price return of 292.97 per cent.

On 17 July 2020, at the time of writing the report (before the market close, GMT 8:28 AM+1), Greatland Gold Plc shares were trading on the London Stock Exchange at GBX 12.15, marginally down by 1.22 per cent from the previous day closing price. The stock has given a price return of 572.13 per cent on YTD basis.

 

  • Condor Gold Plc (LON: CNR)

Condor Gold Plc is a gold miner based in London. In its first-quarter 2020 results, the company reported a gain of £92,477 as compared to the loss incurred in the same period in the previous year. The company has recently issued 500 thousand ordinary shares.

Since the pandemic severely impacted the UK stock markets in the mid of March this year, the shares of the company had made a low of GBX 21.00 on 19th March 2020. The stock price closed at GBX 42.25 on 16 July 2020. In a period of just four months, the stock has delivered a price return of 101.19 per cent.

On 17 July 2020, at the time of writing the report (before the market close, GMT 8:36 AM+1), Condor Gold Plc shares were trading on the London Stock Exchange at GBX 42.00 down by 0.59 per cent from the previous day closing price. The stock has given 108.64 per cent price return on YTD basis.

Comparative chart of 3-month period: SOLG, GGP, and CNR

(Source: Refinitiv, Thomson Reuters)

 


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The website https://kalkinemedia.com/uk is a service of Kalkine Media Ltd, Company Number 12643132. The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform.

 

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