Tanker attack in the Gulf spurs investor gold rush
THE price of an ounce of gold surged to heights not seen in more than a year, pushing a bunch of precious metals stocks higher.
A slowdown in the world’s two largest economies and the potential for conflict in the Middle East sent investors scurrying to gold, which is prized in times of turmoil as a physical store of wealth.
The prospect of the US Federal Reserve cutting interest rates also prompted some funds to increase their weightings in bullion.
This is because rising interest rates mean the returns are lower on government bonds, so alternative investments are needed.
Changing hands for $1351.30 an ounce – up $15.40 – gold exerted its pull on Fresnillo, up 3.4pc, or 27.4p, to 839.8p, the FTSE 100Mexico-focused group which actually mines and sells silver.
Among the mid-caps, Egyptfocused Centamin climbed 5.1pc, or 5.3p, to 109.35p and Hochschild, which owns operations in Argentina and Peru, was up 2.6pc, or 4.5p, at 179.7p. The worries that drove gold skyward left equity investors fretting, which meant the FTSE 100 ended down 0.31pc, or 22.79 points, at 7345.78.
Oil traders took a breather after recent gains as they assessed the ramifications of the tanker attack in the Gulf of Oman. Brent was 36 cents higher at $62.01, while West Texas Intermediate, the other crude benchmark, dipped by 19 cents to $52.09.
Peel Hunt analysts took a look at the sector, and singled out
Eland Oil & Gas, down 5pc, or 6.2p, to 119p, Gulf Keystone, flat at 215.5p, Serica Energy, down 2.9pc, or 3.8p, to 128p, and Soco
International, down 0.8pc, or 0.5p, to 64.9p, as good bets. After the initial excitement of billionaire Nelson Peltz’s hedge fund taking a 6pc stake in plumbing company
Ferguson, investors received a reality check from the London arm of German bank Berenberg.
Peltz wants to shake things up to boost performance. Berenberg believes the turnaround won’t happen overnight, particularly in the US. It has therefore taken a more bearish stance on Ferguson, which fell 1pc, or 56p, to 5576p, downgrading its recommendation for the stock to ‘hold’ from ‘buy’.
Shore Capital upgraded its recommendation for white goods retailer AO World, which rose 0.1pc, or 0.1p, to 79.1p, saying that the company is good value after a sustained sell-off.
The Liverpool-based broker went to ‘hold’ from ‘sell’. The electricals group, which expanded its offering via December’s acquisition of Mobile Phone Direct, has seen its shares wrinkle by 28pc over the past month, meaning they are now down 53pc in a year. What a week it was for Majestic
Wines, which as well as announcing the unexpected departure of its chairman Greg Hodder and a swing to loss in its final results, appears to have three bidders for its retail network.
US activist fund Elliott Advisors is one, apparently ready to pay £100m for the 200-strong chain.
Peel Hunt said a deal of that order would represent the ‘sale of the century’. The share price fell 2.9pc, or 8.5p, to 283.5p,.
Also on the deal front, IT services specialist Scisys Group rose 23.5pc, or 48p, to 252p after it recommended a £78.9m takeover offer from CGI, the acquisitive Canadian colossus best known for buying Logica for £1.7bn in 2012.
A bullish revenue forecast for a new heat-stable material developed by Biome Technologies sent it surging 20.6pc, or 70p, to 410p. Commercial production has started in the US.