The fallout of last week’s assassination of Iranian general Qasem Suleimani by American forces has proved as tumultuous as one would have expected. With relations between the US and Iran at a nadir, investor demand for safe havens has surged, with gold in particular enjoying strong price rises and hitting seven-year highs.
Bullion is hanging just off these peaks of above $1,580 per ounce, ready and waiting for another surge higher. But it’s not just tension in the Middle East (which we all hope the politicians can find a way to ease soon) that is threatening to propel gold still higher. Fears over US-Chinese trade talks, a hard Brexit, a slowing global economy, and expectations of more monetary policy easing by central banks have been driving gold values for some time.
I recently picked out Highland Gold Mining and explained why it’s a great way to ride the bullion boom. But rather than playing the gold market, why not think about getting exposure to fellow flight-to-safety asset silver instead on the same geopolitical and macroeconomic concerns?
You can play the metal price through buying into a silver-backed exchange-traded fund (ETF), just like you can with gold, or by loading up on physical coins or bars. The problem with these methods however is that they don’t pay dividends to investors, with returns linked solely to how the price of the underlying asset performs.
So forget about that, I say. If you’re looking to get rich from silver, I reckon buying shares in either FTSE 100-quoted Fresnillo or Hochschild Mining is a better bet.
On the march
How has silver performed in the past five days, then? After striking four-month highs just below $18.50 per ounce on Monday, the dual-role metal — so-called because of its role as an industrial and investment asset — was last stable at $18.20 as investors looked for fresh buying cues.
Hochschild and Fresnillo have consequently jumped in value and they were recently trading at their highest since November. A quick look at their price-to-earnings growth (PEG) ratios, which both sit below the ‘great value’ benchmark of 1, suggests that both stocks still have plenty of scope to rise.
It’s not just that silver could rise on the back of its appeal as a safe-haven asset, though. As I say, the commodity is famed for its use inside electronic devices as much as an investment tool, and as a result could be poised to gain on any tech-led manufacturing recovery over the next couple of years.
Profits predicted to boom!
City analysts are certainly upbeat over the profits outlook for both Fresnillo and Hochschild, with current forecasts suggesting that the bottom lines of these companies will swell 34% and 19% respectively in 2020.
And it’s my belief that both firms’ earnings could continue to boom well into this new decade on the back of strong silver prices and the companies’ exciting plans to rev up production. With Hochschild offering a handy 1.9% dividend yield for 2020, too, and Fresnillo an even-better 2% I reckon they offer a lot for growth, value and dividend investors to like. I’d happily buy them both for my ISA today.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. 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.
Motley Fool UK 2020