I’m looking to invest some more money in my stocks and shares ISA soon, but given the fragility of the global economy, I need to be careful when selecting individual UK shares.
Stock markets have made a slight recovery after Monday’s colossal sell-off, but investors remain nervous – the VIX, also known as the “fear index”, rose this week to its highest level since the Covid-19 crisis in 2020.
With this in mind, it might be a good idea for me to increase my exposure to safe haven assets such as precious metals. If the signs of a recession in the US continue to grow, the price of gold in particular could rise even further. The yellow commodity reached a new record high of over USD 2,480 per ounce just a few weeks ago.
Gold looks good
In addition to concerns about the American economy, there are other potential drivers for the gold price:
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A steady stream of global interest rate cuts, which in turn would fuel inflation.
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Interest rate cuts by central banks, especially the Federal Reserve. This could weaken the US dollar and make gold purchases cheaper.
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Growing conflicts in the Middle East, coupled with rising tensions between the West and Russia and China.
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Continued weakness of the Chinese economy.
Buying physical gold or an exchange-traded fund (ETF) tied to gold might be a good idea in this climate. However, I would rather buy shares in a gold mining company.
If I buy a dividend-paying gold miner, I can earn an income And Profit from any increase in the price of gold. And if the company I buy performs strongly, I could make some truly amazing gains.
A top miner
Hochschild Mining (LSE:HOC) is one such company I’m currently keeping an eye on. A combination of rising precious metal prices and strong production news has driven the share price higher in recent months. The price could still rise further.
The company, which operates mines across the Americas, produced 83,034 ounces of gold equivalent and 6.9 million ounces of silver equivalent in the first six months of 2024.
This was above the City’s forecasts. And with Hochschild’s Inmaculada and Mara Rosa projects in Peru and Brazil respectively running at full speed, the company is poised to deliver strong and sustained performance.
The eight analysts who rate Hochschild shares are convinced of this. They have therefore given the company a price target of 294.8 pence per share for the next twelve months. This corresponds to a premium of 39% over the current price level.
Too cheap to ignore
Hochschild’s very low share price certainly offers room for further price gains.
The company is expected to return to profit in 2024 after previous losses, generating earnings of 22.5 pence per share, giving it a price-to-earnings (P/E) ratio of 7.4.
As an added bonus, Hochschild shares also pay a dividend yield of 1.3%. That may not be the highest yield on the market. But as I said, I wouldn’t earn any income at all after buying physical gold or a metal-backed ETF.
Investing in mining stocks can be risky. Hochschild is currently in good shape, but production problems could suddenly arise, affecting profit forecasts.
However, I believe that danger lies in the company’s extremely low valuation. I think it could be a great stock for me to buy in this climate.
The post A cheap dividend share that could be a perfect Stocks & Shares ISA buy while markets fluctuate! appeared first on The Motley Fool UK.
Further reading
Royston Wild does not own any of the stocks mentioned. The Motley Fool UK does not own any of the stocks mentioned. The views expressed in this article about the companies mentioned in this article are those of the author and as such 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 2024
