Part 5 - Precious Metals:
Precious metals provide diversification that protects your portfolio in bad times. But can also benefit in the good times. Investing in the physical metals and the miners will deliver growth and protection over the long term.
Gold as one of the precious metals is seen as a safe haven in difficult times, it’s a hedge against inflation and convertible into any currency. The Rand price per kilo of gold breached R1 million and is currently hovering just below. Silver hasn’t followed gold higher but we’re starting to see the first shoots of a breakout rally. The Gold-Silver ratio is trading at near all-time highs after breaching the 100-level last week.
The platinum group metals face some uncertainty; however, the basket is selling at record levels in Rand and thus profit outlook remains good. There is still strong demand from China for Palladium and Rhodium.
Amplats force masseur curtailed supply before the Covid-19 impact. Supply remains constrained at a time that vehicle sales globally have fallen and production is expected to fall. This is supportive of the metal’s price. Global car production must decline by around 10% to eliminate the palladium deficit this year.
Preferred buy in this theme is Sibanye Stillwater, it produces both gold and PGMs. And it’s recently signed a deal to refine some of its own PGM concentrate that AngloPlats used it. This will see additional benefit accrue to Sibanye’s Marikana mining operations.
Buy Sibanye (SSW) below R34.00.
Investors can switch some of their DRD profits into SSW as per our previous recommendation in May.
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See you next week.
Contributing Editor, Money Morning