Skip to Content

Playing Defence: Gold & APA Group

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

The Latest Q&A

Question asked

Playing Defence: Gold & APA Group

Gold stocks have totally underperformed the highs recently achieved by the underlying gold price, notably in AU$ terms. Somewhat frustrating as a holder. It reminds me a little of when WDS was lagging the oil price upward movement a few years ago, but did then catch up. Do you envisage the Australian gold stocks to catch-up to the underlying commodity price? Is it worth to continue to be patient? If not, would APA be a good defensive alternative as this appeals to be a good buy at current levels along with an attractive dividend yield? WGX - Do you think they will execute their call option of 2500oz per month delivery at $3240 until June 2024? This would surely lock in some margin security. Nothing has been announced following the gold price hitting the call option level last week.



Unfortunately as you say the gold stocks both in Australia and overseas are bearing very little resemblance to the underlying price of precious metals, even more so when we consider the gold price in Australian Dollar terms! We do think this will change and patience will be rewarded, however, holding a gold stock who’s earnings are dictated by a commodity price is a very different proposition to owning APA Group (APA) which is a regulated utility i.e. earnings are regulated and highly predictable.

While both share their preference for lower interest rates, we regard APA as a lower risk investment relative to a gold stock but we do like both at current levels.

Not sure regarding Westgold (WGX), we’re not across the specifics of that option agreement.

image description
APA Group (APA)
image description

Relevant suggested news and content from the site

Back to top