UK stocks are soaring again as confidence returns to global financial markets. Both the FTSE 100 and FTSE 250 have printed strong gains in recent days following Donald Trump’s return to the White House.
In fact, London’s home to a multitude of shares that could benefit substantially from the Republican’s second run as US President. Here’s one I feel could pay off during the next four years and is worth considering.
Bouncing bullion
Precious metals prices are on the front foot again in the days following Trump’s inauguration. This reflects huge macroeconomic uncertainty that the New York native’s unconventional approach to governing creates.
That’s not all though. A series of statements, from talk over the US absorbing Greenland and Canada to proposed trade tariffs, have the potential to fuel inflation and exacerbate existing geopolitical tensions. These are natural drivers for safe-haven assets like gold and silver.
If Trump’s last stint in Washington is anything to go by, bold policies on the economy and world order could dominate his second term, in turn supporting demand for flight-to-safety assets.
Gold star
This bodes well for gold miners like Pan African Resources (LSE:PAF). As you can see, this FTSE 250 share has risen again recently thanks to resurgent bullion prices.
Investing in mining stocks can be riskier than, say, purchasing an exchange-traded fund (ETF) that simply tracks the metal price. This is because company earnings can be crushed by exploration and production issues or problems with mine development.
But on the other hand, owning metal producers can deliver superior returns if operational performance impresses the market. With Pan African Resources, production at its Mogale Tailings Retreatment (MTR) plant continues to ramp up following commissioning in October. It has also recently acquired low-cost operator Tennant Consolidated Mining to give group output a significant shot in the arm.
Another thing to consider is the cheapness of the South African miner’s shares. At 39p per share, it trades on a forward price-to-earnings (P/E) ratio of 6.3 times.
Furthermore, its price-to-earnings growth (PEG) multiple sits comfortably below the value watermark of 1, at 0.1.
Low valuations like these can lead to strong share price gains if market conditions remain supportive and operational newsflow impresses.
An attractive value share
There’s no guarantee that gold prices will continue rising, of course. And this could severely impact Pan African Resources, regardless of how well it’s run or the cheapness of its stock.
A less unpredictable approach from the returning President could sap some of the tension surrounding financial markets. Other factors like a rising US dollar could also harm the performance of buck-denominated assets like precious metals.
Yet on balance, I think the outlook for gold prices remains highly encouraging. And I’m not alone. Analysts at Saxo Bank, for instance, think the yellow metal will strike fresh record peaks of $2,900 per ounce by the end of the year. Others are even more bullish.
Against this backdrop, I think Pan African shares are worth serious consideration.
