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Gold is close to a record price and may well be on track to break the historic $2,000 an ounce mark.
At the beginning of this week, the price held at just over US$1,920 an ounce.
The only time it was ever higher was a week earlier when the price briefly hit US$1,930.
At just over £1,550 an ounce, the sterling price is also pushing for records, although there was a run-up to current levels in the spring of last year as the Russian invasion of Ukraine combined with chaos in British domestic politics encouraged investors to move to places of refuge.
However, the more creative investors in the UK have not just bought physical gold or ETFs.
Value: Gold could be well on its way to breaking through the historic $2,000 an ounce mark. At the beginning of this week, the price held at just over US$1,920 an ounce
They also switched to stocks.
The reasons are simple enough.
Most gold mining companies have a fairly fixed cost base.
Inflation can shift things around a bit, especially if companies overuse oil for their energy costs.
But in general, once the total cost at which an ounce of gold is produced – the all-in supporting costs – is established, it can often remain fairly stable.
And that means that at times when the price of gold rises significantly — as it has done since November by nearly $300 an ounce — all profits go straight to margin.
Big gold diggers, like Adventure and Barrick are doing well. But heavyweight investors are already well exposed to this.
It is the mid-cap and smaller producers such as Caledonia Mining, Pan African Resources, Ariana Resources, Chaarat Gold, Resolute, Scotgold, Shanta and Serabi that get the real boost.
But there is often a lagged effect as market sentiment catches up with fundamentals and investors figure out where the most profit can be made.
No two gold diggers are the same, of course, which is where stock picking skill comes back into the equation.
Gold companies offer safe haven production with the associated downside of operational and – sometimes jurisdictional – risk.
But some companies have a better track record than others in this regard, and the support of an experienced team is probably key to making the right choices in this area.
In southern Africa both Mining in Caledonia (1.135p) and Pan-African (18p) look attractive and well seasoned and boast a long track record of successful gold production and decades of experience operating in the country – Zimbabwe and South Africa respectively.
No easy jurisdictions at the best of times, and yet these companies make it work.
Caledonia has just completed production expansion at its long-lived Blanket mine in southern Zimbabwe and is also currently taking on the acquisition of the country’s largest untapped gold reserve.
It has managed to continue to operate through the ups and downs of recent Zimbabwean history, to the extent that it is now a major player on a national level.
For its part, Pan African also has years of experience in South Africa, keeping production going at some of the country’s most historic mines.
The chief executive Cobus Loots has a Black Economic Empowerment background and also has extensive experience of South Africa’s powerful mining unions.
Over the years, Pan African has kept annual production at or around 200,000 oz, and while the mines haven’t always been easy to work, the company has managed to work its way through.
Shanta (12p) has also experienced occasional failures in what has generally been a strong performance over the years at its mines in Tanzania and, like Caledonia, also has a significant upside to its production profile in the form of exploration potential of several million ounces across the border.
in North Africa, Centamine (116p) comes in and out of favor in Egypt as it appears in Ethiopia KEFI (0.75p) may finally be on the verge of getting the highly anticipated Tulu Kapi project off the ground.
Other existing London listed producers worth checking out include Charat (10.9p), which has been operating a mine in Armenia for some time, and which also benefits significantly from developments in Kyrgyzstan; Serabi (38p), with production in Brazil; Australian company Determined (16p), which has a long track record of manufacturing in West Africa; and local champion Shot gold (40.5p), with its little mine in the Grampians.
And a hat for it Ariana Resources (3.4p), which has interests in small-scale production in Turkey.
Ariana has stayed on track over the years where other more powerful names have fallen, delivering real returns for shareholders.
Aside from the hard cash paid out when deals go well, stocks have also risen significantly in recent years, though a revaluation in response to the latest strength in gold is only faintly visible.
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