Golden opportunity as markets panic

Event-risk and growth concerns saw markets return to worrying this week. But savvy investors are already on-board those assets that tend to benefit during times of fear, those that shine bright when market gloom descends. What stocks and commodities can help you deliver gains to offset portfolio losses?

A cocktail of concerns saw markets reverse their June rally this week, but not everything was in decline with technicals proving pivotal in flashing early warning signs of what was on the cards. While a bearish head & shoulders pattern was suggestive of a market top and a major breakdown, bullish flags offered those of a bullish persuasion – preferring to buy low and sell high, rather than trade short  – the signals they needed to capitalise on gains that were on offer elsewhere.

To briefly cover the aforementioned event-risk, the US Federal Reserve delivers its June policy update next week. It would surprise markets if stateside interest rates were raised again, but what the statement and press conference says about markets, headwinds and outlook could sway market sentiment. In addition, with less than a fortnight to go before the UK referendum it is a close call according to polls and there is a very real risk that the electorate votes to leave the European Union. Elsewhere, a China data dump on Monday morning has potential to deliver a surprise either way regarding the economic state of the world’s #2 economy.

By now you are asking what is rising while the markets are in free fall. Well I won’t keep you waiting any longer. They are raw materials of finite supply, mostly used in jewellery, regarded as traditional safehaven ports in a storm. I give you Gold and Silver. And while both can be traded as Commodities there are also a few London-listed precious metal miners whose shares are understandably correlated with the shiny metals, offering bullish opportunities for investors when markets turn bearish.

And while Silver delivered an 8% bounce this week, helping Fresnillo (FRES) to trade fresh 2.5yr highs, a 5% bounce by Gold saw it break beyond May falling highs and propel Randgold Resources (RRS) back towards its best levels of 2016. It’s thus no surprise to see the two stocks among the best performers this week (note other smaller precious metal miners handsomely positive) while 80% of UK 100 shares nurse losses.

So the next time that market sentiment turns south (bad data, event risk, etc), rather than risk calling the bottom and getting it wrong, take a moment to consider what might benefit and deliver gains that you can profit from. It could well be that the metals and miners mentioned earlier are facing north. And remember you don’t have to navigate the markets and make this decision alone.

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Mike van Dulken, Head of Research, 10 Jun