The gold price in Australian dollars (AUD) is near its highest point in history. The combination of high gold prices generally coupled with the weakest AUD in 18 years has created a boom for all investors holding physical gold or ASX gold shares.
While physical gold has its uses in times like these, the wiser investment is always the gold company itself. Whenever the market sees good performance or a rising gold price, the gold miner’s share price rises several times that of physical gold.
These 3 investments below are standout opportunities in the gold sector. Trading has been heavy in all of them, yet I believe they are still good opportunities.
Direct benefit of a high gold price
Perth Mint Gold (ASX: PMGOLD) is an exchange traded fund (ETF) on the ASX. Personally, I am not a fan of ETFs. However, this is no ordinary ETF. PMGOLD is backed by the West Australian government and is backed on a 1:100 oz basis by physical gold in the Perth Mint.
This provides investors with the ability to buy gold on a fractional basis rather than one expensive ounce at a time. In addition, investors do not have to go to the Perth Mint to buy it or secure it. The fund mirrors the gold price. Year to date (YTD), PMGOLD has risen by 22% (at the time of writing). This is a low margin fund, backed by a sovereign government, with high liquidity.
The most traded gold stock
Evolution Mining Ltd (ASX: EVN) is by far the most traded ASX gold share in March. Its share price is up 14% YTD at the time of writing. From its lowest point on 16 March 2020, it has risen 29%. This is a very well managed and conservative company. The CEO is notable for always erring on the side of caution in his public pronouncements.
Evolution Mining shares are currently trading on a price-to-earnings (P/E) multiple of 26.9. This is above their average 10-year P/E of 15.5.
Personally, today’s price of $4.33 is a discount to my own target price for this company. I am also an eternal gold price bull and I think the bull market in gold still has a way to run.
A maiden producer
Gold Road Resources Ltd (ASX: GOR) is the third most traded share in March. This is Gold Road’s first year as a producing company and it has already announced greater than anticipated cash flows as a result of the high AUD gold price.
Its Gruyere mine site is a long life/low margin Tier 1 deposit of 6.62 Moz with an all in sustaining cost of A$1,102. This places it as one of the most financially efficient mines in the world.
At the time of writing, the Gold Road share price is still down 1.82% YTD but has improved by 66% since its low point on 16 March.
It is only when the world is really in a prolonged crisis that we notice the strong haven aspects of gold. In Australia, this is even more the case. Currency traders flocking to the security of the USD has compounded our advantages.
I believe the high AUD gold price still has a very long way to run and will remain high even if the USD price lowers. I believe these investments offer an opportunity for investors looking for a safe haven to preserve capital.
Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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