In the autumn of 2022, gold was trading at little more than $1,600 an ounce. It has more than doubled in price since then, topping $3,300 last week.
Investors spent more than £15 billion on gold funds in the first three months of this year, and central banks, from Poland to Qatar, are stocking up on bullion.
With President Donald Trump stoking global uncertainty, gold is the most obvious asset to buy. And the market is hot.
During the California Gold Rush, some miners prospered but the real money was made by suppliers and shopkeepers.
Today, many gold mining stocks are soaring but firms in related industries have yet to catch up – and they could deliver real long-term rewards.
Midas touch: Many gold mining stocks are soaring but firms in related industries have yet to catch up – and they could deliver real long-term rewards
H&T
Pawnbroking has been around almost as long as gold has been dug up from the ground, and H&T is the biggest of the breed in Britain, with 285 stores and a market valuation of almost £170 million.
Customers include not just individuals but, increasingly, small businesses which pawn family jewellery to buy stock or pay VAT.
Builders also use H&T to manage wage bills. Local traders rely on the group when they need cash. Loans can be as high as £5,000 or more but the process is simple, transactions are speedy and the money is repaid within a couple of months.
Alternative sources of cash are drying up too, with banks often reluctant to lend to small firms, and short-term lenders, from Wonga to Provident, leaving the market.
Their demise has fuelled demand for pawnbroking across the board. According to City broking firm Panmure Liberum, a third of UK adults cannot afford to pay £300 if their washing machine breaks down. Many visit local pawnbrokers for help. Half of H&T’s loans are for £250 or less, with households pledging rings and chains in exchange for fast finance.
About 75 per cent of H&T’s revenues come from pawnbroking but it also deals in foreign exchange, sells jewellery and buys gold, which it sells on to bullion dealers.
Chief executive Chris Gillespie is upbeat about the future. Profits for 2024 rose 10 per cent to £29 million and the pledge book grew 26 per cent to £127 million, evidence of that growing need for quick and easy borrowing.
Dividends rose 6 per cent to 18p and further gains should follow.
At £3.82, H&T shares have had a rocky ride in recent years but this is undeserved. With a 5 per cent yield and robust prospects, the stock should prove rewarding.
Traded on: Aim Ticker: HAT Contact: handt.co.uk or 0800 838 973
Ramsdens
Ramsdens is smaller than H&T and its business model is slightly different, but the outlook is equally bright.
Headquartered on Teesside, the company operates 169 shops and this year is shaping up well, fuelled by the strong gold price, smart management and growing demand for alternative lending.
Chief executive Peter Kenyon is expecting annual profits of at least £13 million, which is ahead of forecasts and up 14 per cent from 2024.
Like H&T, Ramsdens offers pawnbroking, gold buying, jewellery retail and holiday money. Unlike its big brother, however, revenues are almost equally split across all four divisions.
Ramsdens’ gold business is making strides, as consumers with valuables at home opt to sell their wares and pocket the cash. Some are doing the reverse, fuelling growth in the jewellery business as customers opt to buy gold because prices are high.
Pawnbroking customers can also secure higher loans than in the past, driving higher interest payments for Ramsdens. Customers tend to be cautious, however, with borrowings of around £200 frequently paid back early.
Kenyon is cautious too. Lending terms are conservative and, last year, a store opening programme was put on hold while he assessed how a Labour government might affect trading. The decision was canny but Kenyon hopes to start expanding his portfolio again, and there is a growing online business for jewellery sales, pawn and foreign exchange.
Brokers expect an 8 per cent increase in sales to £104 million this year, with profits rising to just over £13 million and a 15 per cent hike in the dividend to 12.9p. Solid gains are forecast for next year.
Ramsdens shares have had a decent run but are still good value at £2.60, and with a generous 5 per cent yield they look attractive.
Traded on: Aim Ticker: RFX Contact: ramsdensplc.com, 01642 579957
Capital
Mining services group Capital generates about 80 per cent of its revenues from gold miners, so buoyant markets should have been a boon.
Last year, however, some contracts ended, some were hit by teething problems and some were delayed. Results fell short of expectations, the shares fell, chief executive Peter Stokes resigned and chairman Jamie Boyton is now in charge. A 17-year veteran of the business, Boyton is moving fast to put Capital back on track.
Customers include the world’s biggest goldminers and the firm provides a full range of services, from exploration drilling and earthmoving to fleet maintenance and ore analysis.
In America, Capital is working with Barrick Gold and Newmont on Nevada Gold Mines, the largest gold mining complex in the world, collectively producing more than three million ounces of gold annually. Capital hit problems with labour last year but these are being ironed out.
Capital is winning contracts too, from a massive new mine in Pakistan to a major laboratory in Alaska. Revenues and profits are expected to slip back this year but a sharp recovery is forecast for 2026. Investors who buy now, at 66p, should reap the benefits.
Traded on: main market Ticker: CAPD Contact: capdrill.com or 020 3464 3250
Weir Group
Weir Group specialises in pumps and crushing equipment. With a facility less than 200km from every mine site in the world, the business, based in Glasgow, derives a quarter of revenues from making kit and the rest from servicing and maintaining it. Gold mines make up a large part of the customer base and the firm works with major miners across the globe.
Mining software is also on offer, to aid exploration and make sites more efficient.
The sector is growing and Weir chief executive Jon Stanton recently spent £650 million on Perth-based Micromine, a market-leading business which should fuel short- and long-term growth.
Brokers expect a 9 per cent increase in profits to £467 million this year, climbing steadily thereafter and accompanied by rising dividends. Weir’s focus on maintenance offers a degree of resilience and rising gold prices are also helpful. At £21.48, the shares should gain ground.
Traded on: main market Ticker: WEIR Contact: global.weir or 0141 308 3617
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