Maybe in the not-too-distant future my grandchildren will ask: “What did you do in the Trump trade war, Grandpa?” Well, I certainly won’t be able to claim I was awarded a gold medal for bravery in backing bullion to the hilt, persistently refusing to advance further after initial gains. Taking cover in well-fortified Reinet and Wheaton Precious Metals is not what Sgt Rock would do … Yup, you have to get through the (many) skirmishes.
At Thursday’s close, before the Easter weekend, gold shares on the JSE were under siege, with AngloGold Ashanti down 5%, Harmony Gold down 4% and Gold Fields down 3.5%. Over the course of the weekend, the gold price skittered back up on renewed US/China trade tensions, even touching a record intraday high of $3,512 an ounce on Tuesday. Consequently, the JSE opening on Tuesday saw a dramatic swing in gold shares: Harmony surging 8%, Gold Fields up about 7% and AngloGold up 5%.
It’s hard to think that some punters — citing unprecedented volatility from unpredictable political developments — have been arguing vehemently against the “buy the dip” strategy. In truth, it’s difficult not to be rattled by US President Donald Trump’s unchecked utterances. The clumsy critical tilt at US Federal Reserve chair Jerome Powell is a case in point, causing investors to not only fret about the independence of the Fed but also to question Trump’s simplistic (and I’m being polite here) grasp of fiscal policies.
Powell will likely remain in Trump’s crosshairs, and understandably US markets were in a fair bit of bother early in the week. Gold bugs, on the other hand, will be grinning from ear to ear and, no doubt, fantasising about stronger cash flows and bumper dividends. This brings me to a related topic — the poor relative of gold, silver. I had a friend who back in the late 1990s was already espousing the virtues of this Cinderella precious metal. One of the few regrets I don’t have is never having taken a long-term position in physical silver (aside from my exposure via Wheaton, as mentioned earlier). Other than the huge spike in late 2011, silver has been outshone by gold.
In 2011 an ounce of gold could buy you about 30oz of silver. Today an ounce of gold will get you more than 100oz of silver. Some — including market veteran Des Mayers, an analyst at Afrifocus Securities — still believe the silver price has “big catch-up” potential. It’s worth hearing the views of investors that have been professionally involved in the markets since the mid-1960s and seen their share of ructions and rewards. Thus, I quote from a WhatsApp message I received from Mayers early on Tuesday morning: “Ideally, I would like to see the gold price pull back and drag the silver price back … to provide an excellent entry level. Silver has invariably been a ‘late starter’ in big precious metals uptrends … but then moves sharply higher.” He did add: “Also the downside moves have been equally dramatic when they occur.” Use it, don’t use it.
It’s hard to think that some punters have been arguing vehemently against the ‘buy the dip’ strategy
Of course, it is slightly worrying that we are running a cover story this week on Purple Group’s remarkable success story on easy-to-use online trading platform EasyEquities. This is a most testing time for retail investors, especially the multitude of novice punters. EasyEquities has been instrumental in rebuilding a critical mass of retail investors, many of whom were washed out of the market in the great technology and financial services meltdown on the JSE at the turn of the century.
This would be a hell of a juncture to start an investment journey, as my dear daughter did recently with her own EasyEquities account. My son — only two years in the market — already sounds so jaded about his Nasdaq nadir that poor Sarah steadfastly refused to commit any of her deposited cash to an investment. It’s a work in progress, though one riddled with fear, amazement, anxiety and excitement — and not necessarily in that order. Under these calamitous circumstances, what would I have told my 20-year-old self to do? Well, besides “Don’t buy those damned Gazankulu Gold Holdings” shares, I might have advised a “disciplined and diversified delve” into quality and dividend-paying stocks, or a bouquet of heavily discounted investment counters (or ETFs, for the younger generation). Is there any better way to make a slow start?
Moving on to more specific matters, I noted with a good deal of interest that renewable energy group Montauk — spun out of Hosken Consolidated Investments just over 10 years ago — is committing $5m to a share buyback. Montauk, which generates gas and electricity from rubbish at landfill sites and animal droppings on farms around the US, has seen its share price fizzle badly of late. Over a year the stock has more than halved from R115 to about R40, touching as low as R33.70 this month.
Montauk’s share price was R338 in September 2022 — almost a reverse 10-bagger. Now, $5m (less than R100m) is not a huge share buyback for a company worth about R5.6bn, but mopping up weak holders could be significant. Interestingly, Montauk indicates it will buy shares on the open market and is willing to privately negotiate transactions with shareholders. I wonder if, considering the latter option, there might be one or two meaningful shareholders looking for an orderly exit?
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