Thinking of getting exposure to gold, but fearing that you might have missed the boat? Don’t fret is my advice. Buying of the metal and of bullion-backed financial instruments has continued to detonate. And there’s ample reason to expect sales of such assets to carry on rising. So I believe that buying shares in gold digger Centamin (LSE: CEY) could be a good idea today.
Data just released from the World Gold Council illustrates the strength of investor interest. Total holdings in global gold-backed ETFs rose by 61 tonnes in January, it said, with strong demand in Europe and North America offsetting a marginal fall in Asian buying interest. Consequently, aggregated holdings soared to fresh record peaks of 2,947 tonnes.
Plenty of fuel
Rallying stock markets since then suggest that intense fears over the emergence of the coronavirus last month have largely subsided. However, the full implications of the outbreak are yet to be gauged and the virus continues to spread at an alarming rate.
And from an economic perspective, the tragedy threatens to deal huge damage. It’s possibly why China has just slashed tariffs on 1,717 US-made goods, a move to support the economy in these troubled times.
As I have said before, there are a number of other geopolitical and macroeconomic issues (like Brexit and China-US trade wars) that could drive demand for safe haven assets like gold in 2020 and beyond, even though gold’s price has been lower lately.
Record gold around the corner?
Centamin is one bullion producer that has fallen in value in February along with gold. It just closed at three-week lows below 130p per share following the metal’s drop towards $1,550 per ounce. I don’t expect this weakness to hold for long given the issues discussed above and the likelihood of more rapid central bank rate-cutting across the globe.
There’s certainly no shortage of experts who believe that gold values will keep rising in 2020. Take those recently participating in the London Bullion Market Association’s respected annual precious metals forecast survey. These analysts expect the yellow metal to average $1,558 per ounce this year, up 12% from 2019’s levels. And one respondent even expects gold to stride to new record highs above $2,000.
Growth, dividends and value
Most precious metals analysts might not be as bullish as Ross Norman of bullion dealer Sharps Pixley. But they agree that the price outlook is pretty compelling. And thus they expect earnings at Centamin to barge 55% higher in 2020.
This strong projection also makes the mining giant look pretty attractive from a value perspective. Its forward price-to-earnings growth (or PEG) ratio sits at just 0.3, well inside the accepted bargain benchmark of 1. Meanwhile, income chasers can celebrate broker expectations of more dividend growth this year, resulting in a meaty 5.2% yield. Centamin, in my opinion, is one terrific all-rounder that’s worthy of serious attention at current prices.
