The price of gold has been shooting up like a rocket and now trades within a whisker of its all-time high. Such movements can be eye-catching. But I think there’s a great opportunity to invest in shares right now following the stock market crash. I’d choose shares over gold to build a fortune.
The ‘problem’ with gold is every previous high has been briefly held. The price of gold has so far always crashed back down from its peaks almost as fast as it reached them. My fear is that we could see a fast plunge this time as well.
The stock market crash has generated opportunities
After all, gold tends to rise when economic times are uncertain. Right now, we have the coronavirus pandemic damaging economies around the world. And because of it, companies can’t even give us any forward guidance on earnings in many cases. Nobody is sure how long or hard the recession will be. Uncertainty has never been higher and that reflects in the price of gold.
One scenario that could collapse the price of gold and boost the stock market is the delivery of a working vaccine for Covid-19. The economic outlook will likely change dramatically once a vaccine begins to roll out. And it could happen soon. My guess is the days of high gold prices could be numbered.
Meanwhile, shares have been beaten down. And if you view the trading challenges facing the businesses that are underlying the shares as temporary, we could be seeing a decent buying opportunity. Ten years from now, the stocks you’ve bought today may prove to have been great investments. There’s a good chance the pandemic will be a distant memory by then and business will have staged a strong recovery from today’s challenging times.
Multiple investment strategies
Of course, not all shares are struggling. Some are thriving in the current economic environment, such as gold miner Centamin. The strength of the stock is unsurprising given the high price of gold. However, as with betting on the price of gold directly, I’d argue that the strong rally so far this year increases the risk. Indeed, an investment now would be exposed to what I see as a strong possibility of the gold price retreating at some point.
Other strong performers recently include online electrical products retailer AO World and internet security software supplier Avast. We’ve also seen robust rises from distribution and services company Bunzl and betting and gaming operator Flutter Entertainment.
One popular investing strategy involves researching and analysing the companies behind shares leading the market, such as those I’ve described. Indeed, going with proven winners can be effective. However, I’d be wary now in case the boost in trading of these companies is Covid-dependent. The arrival of a vaccine could change things.
Another approach involves taking a contrarian stance. For example, housebuilder shares look beaten down right now, such as Persimmon, Redrow, Taylor Wimpey and Vistry. However, recent news about the relaxing of planning laws and the ongoing low rates for mortgage borrowing make the sector look attractive.
Whichever approach you take to investing, I reckon there are better opportunities to build a fortune with shares right now than there are with gold.
