Why investing in gold this year can be profitable?

Highlights

  • The year 2021 has been one of the most disappointing years for profit-seeking gold investors after a massive rally of five years.
  • The return in yellow metal is usually considered to be a hedge against inflation.
  • But with rising inflation globally by around 5-7%, gold almost gave marginally negative real return in 2021.

The year 2021 has been one of the most disappointing years for profit-seeking gold investors after a massive rally of five years. Although, the return in yellow metal is usually considered to be a hedge against inflation. But with rising inflation globally by around 5-7%, gold almost gave marginally negative real return in 2021, which means the biggest risk is not able to beat inflation. 

Over the last decades the return in yellow metal translated into a compound annual growth rate (CAGR) of around 5% and gold and silver even fall behind the return delivered by stock market. In January 2021, one troy ounce of gold was valued at £1,399, which dropped to £1,350 in the year ending. In March, the prices of yellow metal hit its lowest point of £1,217, which rose to £1,350 in June, before it dropped to £1244 by August and in November say a mini rally which rose prices to £1,403.

As the year 2022 is expected to witness more increase in inflation, should investors consider investing in yellow metal?

Buying gold stock rather than physical yellow metal has various advantages

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As the world learns to live with pandemic experts recommend holding gold or gold stocks as a portfolio diversifier and at least keep a 5-7% allocation in gold as inflation hedge and to mitigate risk.  Although 2021 was a disappointing year but 2022 can be a much better year for the yellow metal as one troy ounce of gold rose by £250.  

Buying gold stock rather than physical yellow metal has various advantages such as higher total return as the cost and production is lower due to economies of scale, no storage cost, and unlike gold, gold stocks are not unproductive assets.  

Also Read: Can Bitcoin replace gold as a hedge against inflation?

Here are some of the gold stocks that you may consider investing in 2022.

  1. Centamin Plc (LON: CEY)

The current market cap of Centamin Plc stands at £1,004.03 million as of 07 January 2022. It has given a negative return of 33.40% to its shareholders in the last one year. Its YTD is 0.36% as of 07 January 2022. Centamin PLC’s shares were trading at GBX 89.14, up by 2.67%, around 10 am on 7 January 2022.

  1. Pan African Resources Plc (LON: PAF)

The current market cap of Pan African Resources Plc stands at £335.14 million as of 07 January 2022. It has given a negative return of 32.15% to its shareholders in the last one year. Its YTD is 5.63%. Pan African Resources PLC’s shares were trading at GBX 17.56, up by 1.04%, around 10 am on 7 January 2022.

  1. Condor Gold Plc (LON: CORA)

The current market cap of Condor Gold Plc stands at £43.99 million as of 7 January 2022. It has given a negative return of 41.94% to its shareholders in the last one year. Its YTD is 4.75%. Condor Gold PLC’s shares were trading at GBX 30.50, up by 1.67%, around 10 am on 7 January 2022.

Also Read: Coro Energy, Wishbone Gold & Prime People: 3 AIM stocks to buy

  1. Antofagasta Plc (LON: ANTO)

The current market cap of Antofagasta Plc stands at £13,092.18 million as of 07 January 2022. It has given a negative return of 14.33% to its shareholders in the last one year. Its YTD is 1.31%. Antofagasta PLC’s shares were trading at GBX 1,357.50, up by 2.22%, around 10 am on 7 January 2022.

 

  1. Greatland Gold Plc (LON: GGP)

The current market cap of Greatland Gold Plc stands at £619.12 million as of 07 January 2022. It has given a negative return of 56.79% to its shareholders in the last one year. Its YTD is -4.40%. Greatland Gold PLC’s shares were trading at GBX 15.05, down by 1.63%, around 10 am on 7 January 2022.

Also Read: Top 7 gold stocks of 2021

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