Barclay’s bull or Pearce take? Talking gold, plus a green hydrogen stock pick
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Each Friday, corporate advisory firm Barclay Pearce highlights the key trading themes of the week, along with which companies and sectors Stockhead readers should be keeping their eye on.
Barclay’s head of trading, Trent Pearce, kicked things off this week with an update on the precious metal following some steady price gains over the past week.
After repeatedly closing below $US1,700 an ounce in March for the first time since June last year, prices have moved back towards $US1,800 in April.
Among the notable market developments, Primmer highlighted a key shift in China during the week, which saw Chinese authorities increase the quotas for gold imports by domestic banks.
China is typically one of the largest gold importers in the world. However gold purchases slowed down materially during the pandemic which means last week’s shift could have a material impact on global demand.
“I don’t think it will be too long before we see $US2,000/oz an ounce again,” Primmer said.
“A lot of people might think it’s fairly vanilla holding gold, but I believe it’s still an asset you need exposure to as part of a balanced portfolio.”
Along with the demand-side developments in China, Primmer said gold has also been proven as a good store of value in the event of rising inflation.
“These are reasons why gold is a good hedge against the market coming off a bit from record-high levels,” Primmer said.
Speaking of inflation, Primmer said the prospect of higher CPI is definitely a talking point among professional investors.
But ultimately, Barclay Pearce shares the view that it’s unlikely to be a 2021 problem.
“Talking to other brokers and some of the larger investment banks, the rhetoric around inflation and interest rates is pretty considerable,” Primmer said.
“Obviously the economy is growing, but I think the anxiety is that inflation increases too fast which flows through to rates, and then what the impact is on the economy?”
“But I don’t think there’s too much of a concern in the short term about interest rates,” he said.
On the company side, Primmer reiterated the opportunities as part of the broader green hydrogen thematic.
Last month, Barclay Pearce highlighted that green hydrogen is the one to watch among sectors at the early stage of a new structural growth cycle.
The shift is still front and centre, with US President Joe Biden scheduled to hold an international climate summit while the Morrison government this week said it would spend $539.2 million on new clean energy projects.
Of that total, $275.5 million will be allocated towards the construction of another four hydrogen production hubs in regional areas.
“For us it’s been a key theme and I think the government’s announcement is evidence of that,” Primmer said.
ASX investors still aren’t exactly “spoilt for choice” in the sector, he added.
But among listed investment opportunities, Primmer still likes Hazer Group (ASX:HZR), which has climbed off recent lows near $1 after falling back from around $1.80 in February
“From a technical perspective, I like where it’s trading at the moment having just bounced off support,” Primmer said.
“It’s one of only two or three dedicated green hydrogen plays, so in my view it’s logical to have some exposure there.”
“I think it’s a bit of a punt with this market — obviously it’s going to take time to develop and you’ve got new entrants in the sector,” he said.
“But I think (Hazer) is well positioned. It’s got a market cap of around $170m so it’s not tiny but it’s also not large at all.”
“So if you’re a retail investor and you want exposure, or even sophisticated investors who don’t want to lock up funds in pre-IPO but still want access to the green hydrogen thematic, I think buying companies like this is probably worthwhile.”
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.