Desperate times call for desperate measures. With fears over the tragic coronavirus outbreak in China growing, demand for safe havens like gold is back on the boil. Last trading around $1,580 per ounce, the yellow metal seems poised for another move higher.
Marching on
Gold certainly has the wind in its sails. The metal price averaged $1,392 per ounce in 2019, up 10% year-on-year, according to Refinitiv. And things picked up in the latter half of last year: between July and December, gold changed hands at $1,477 on average. This was up 13% on an annual basis, and up 21% from the first six months of the year.
These strong gains were built on strong investor interest, according to the latest Refinitiv GFMS Gold Survey, driven by geopolitical tension and fears over the global economic and trade outlook. Loose central bank policy was a factor too.
As a result, gold net longs exploded 362% in 2019 to 819 tonnes by year-end. Meanwhile total holdings in global gold-backed ETFs added 387 tonnes last year, Refinitiv has estimated. Aggregated holdings stood at record highs close to 2,700 tonnes in December.
$1,700/oz in sight?
Refinitiv has joined the chorus of brokers who believe gold prices will remain robust in 2020. It is forecasting an average price of $1,558 per ounce for the year, and said values could test $1,700 later in 2020.
“Central banks’ monetary policy is likely to remain on the loose side,” according to Cameron Alexander, manager of precious metals research at the data researcher. He thinks there is a possibility of “at least one interest rate cut from the [Federal Reserve] later in the year, particularly should the US economy show renewed signs of stagnation.”
While he said demand from critical Asian markets “will likely remain weak this year,” he thinks “ongoing central bank purchases and renewed investor interest will lend support for higher gold prices.”
A great gold play
It seems then that getting exposure to gold is a sound investment idea for the new decade. And I reckon buying shares in bullion producers is the way to go. Unlike buying into gold ETFS or similar investment products (or even snapping up the physical metal), some of these London-quoted producers offer the added bonus that you often get with share investing — dividend payments.
Centamin (LSE: CEY) is one such share that has caught my eye on Thursday. It is not just on account of its 5%+ dividend yield for 2020 either. Today, the Egypt-focused business reiterated its exceptional production credentials by releasing blowout numbers for last year.
The FTSE 250 firm pulled 480,528 ounces of the shiny stuff out of the ground in 2019, which was up 2% year-on-year. Output levels really impressed in the fourth quarter too — at 148,387 ounces, this was up 51% on an annual basis.
And Centamin is expecting more progress on this front in 2020. Total production of between 510,000 ounces and 540,000 ounces is predicted. No wonder City analysts expect earnings at the firm to explode 46% this year. With the company also carrying a rock-bottom, sub-1 price-to-earnings growth (PEG) ratio of 0.4, I reckon this gold producer is a top income share to load up on today and a great way to play the gold price rise.
