- The gold price hit a new all-time high last week
- Shares in gold mining companies have lagged the price of physical gold
- If the gold price remains high this could present a buying opportunity
Victoria Hasler, head of fund research, Hargreaves Lansdown:
“When the world starts to look scary, investors often turn to assets which they perceive to be ‘safe’. With a war escalating in the Middle East, at the same time as other ongoing conflicts around the world, global demand for gold from investors has risen. Combined with strong buying by central banks, the gold price has hit an all-time high.
Who stands to benefit from this rise in the gold price? Owners of gold, of course, but gold miners – the companies that actually get the gold out of the ground – should also benefit as the price of gold rises. This is because the cost of mining the gold doesn’t change, but they can now sell it for more. However, there is often a lag between the price of gold rising and the share prices of gold miners increasing, and this has certainly been true recently. Over the last year the price of gold has increased 16%, but FTSE gold miners index has actually declined 2%. This leaves us asking if there might be an opportunity now in these shares.
Gold fund idea for investors
Whilst you could buy shares in gold miners directly, for many it will be more suitable to do so through a fund offering diversified exposure to lots of different gold miners. One fund that does this is the Ninety One Global Gold fund.
Managed by the experienced George Cheveley, this fund invests the bulk of assets in companies involved in gold mining around the world, although it may also hold a small amount in other precious metals such as silver. Around half the fund is invested in Canada, which is home to almost half of the world’s publicly listed mining and mineral exploration companies. We believe that funds such as this could stand to benefit from the higher gold price.
