Time for a ‘flight to safety’?

WITH more uncertainty ahead, one trend that could return is a so-called ‘flight to safety’. This typically means buying gold and so-called defensive stocks.

Investors turn to gold when worried about wider stock markets. Similarly, companies whose products are in demand during bad times as well as good are classed as ‘defensive’ investments and become popular in times of fear.

The Covid-19 crisis has been no exception: gold miner Fresnillo’s share price has doubled in 2020, for example. Richard Hunter, from Interactive Investor, says: ‘Any further spikes in the price of the precious metal could bode well for Fresnillo’s prospects.’

Another stellar rise has come from the gold mining company Petropavlovsk, with the share price up by 166 per cent in the year so far.

Emma Wall, head of investment analysis at Hargreaves Lansdown, says: ‘ As we enter yet more economic uncertainty, backing businesses with strong balance sheets and global revenues is a sensible choice. For investors who are more cautious about the outlook for stock markets – and with good reason considering coronavirus, Brexit and the US election – a mixed-asset fund hedges your bets.’

She tips both Troy Trojan, which i s up 7.4 per cent this year, and Pyrford Global Total Return, which is down 0.3 per cent this year. Both funds invest in a mixt ure of s t ocks, bonds, cash and gold. ‘The fund managers prioritise preserving your capital over out and out growth,’ Wall says. Of the two, she says Pyrford is the more cautious.