Here’s a cheap UK stock that could go up while Donald Trump is US president

UK shares are rising again as confidence returns to global financial markets. Both the FTSE 100 again FTSE 250 have posted strong gains in recent days after Donald Trump’s return to the White House.

In fact, a London home with a lot of shares would benefit greatly from a second Republican run as US President. Here is one that I feel could pay off within the next four years and is worth checking out.

A bull that beats

Precious metal prices are on the upswing again in the days following Trump’s inauguration. This reflects the great macroeconomic uncertainty created by the New York native’s unorthodox approach to management.

It doesn’t end there. A series of statements, from talk of the US annexing Greenland and Canada to proposed trade tariffs, have the potential to fuel inflation and increase existing political tensions. These are natural drivers of safe-haven assets such as gold and silver.

If Trump’s eventual stay in Washington is anything to go by, bold policies on the economy and global order may dominate his second term, and support the need for aviation supplies to security.

A golden star

This is good for young gold miners Pan African Resources (LSE: PAF). As you can see, this FTSE 250 share has risen again recently due to the resurgence of bullion prices.

Investing in mining stocks can be more risky than buying an exchange-traded fund (ETF) that simply tracks the price of the metal. This is because the company’s earnings can be squeezed by problems with exploration and production or problems with mine development.

But on the other hand, being a steel producer can bring high profits if the work performance impresses the market. For Pan African Resources, production at its Mogale Tailings Retreatment (MTR) plant continues to grow after operating in October. It recently acquired low-cost operator Tennant Consolidated Mining to give the group’s bottom line a significant shot at arm’s length.

Another thing to look at is the cheapening of the South African miner’s shares. At 39p per share, it trades at 6.3 times forward earnings (P/E).

In addition, its price-to-earnings growth (PEG) remains comfortably below the 1 watermark value, at 0.1.

Low ratings like these can lead to strong share price gains if market conditions remain supportive and active news flow is impressive.

Attractive value proposition

There is no guarantee that gold prices will continue to rise, of course. And this could have a very negative impact on Pan African Resources, regardless of how well it operates or how cheap its stock is.

A less-than-expected approach from the returning President could ease the tension in financial markets. Other factors such as a rising US dollar can also hurt the performance of currency assets such as precious metals.

However in comparison, I think the outlook for gold prices remains very encouraging. And I’m not alone. Analysts at Saxo Bankfor example, assume that the yellow metal will reach new record highs of $2,900 per ounce by the end of the year. Some are very strong.

Against this background, I think Pan African shares should be seriously considered.