In my opinion, Centamin (LSE: CEY) is a brilliant safe haven for ISA investors to buy in these turbulent times. I’ve spoken at length about how a wide range of macroeconomic and geopolitical landscape problems will likely drive gold prices to fresh landmark highs. They could have a significant effect in pushing precious metals higher too.
Many of these issues have a significant impact on the US in particular and thus threaten to keep the dollar on a downward trend. In this scenario it becomes more cost effective to buy greenback-denominated assets like gold. And it’s a phenomenon that has lifted yellow metal prices in recent days.
The steep rise in Covid-19 cases in the States; those mass protests and trade fears; and a volatile presidential election process later in the year are likely to keep the dollar under the cosh, to the benefit of bullion prices.
Is gold looking underbought?
So 2020 looks set to be another blockbuster year for gold prices. Why not ride this phenomenon by buying shares in FTSE 250 ‘safe haven’ Centamin?
Gold prices gained almost a fifth during the course of 2019 to finish at $1,515 per ounce. And over the period, Centamin’s stock rocketed 55% in value. Compare that to the slight decline that the broader FTSE 250 recorded in that time.
Evidence shows that investment demand for safe-haven precious metals remains quite strong. According to UBS, total holdings in global gold-backed exchange-traded funds (ETFs) stand at their highest for a year. Yet current ETF net positions of 27.43m ounces stand some way back from the record peaks of 38.56m ounces. Considering that the world economy faces the biggest upheaval since the Great Depression, well it seems that there remains plenty more scope for holdings to rise.
A top safe-haven share
No wonder some analysts are tipping gold to punch through the $3,000 per ounce milestone before long and to fresh all-time highs. It remains just off recent seven-year peaks above $1,760 and looks poised for another run northwards.
But don’t think that gold’s bolt has been shot should it weaken in the near term. The boffins over at UBS say that they “expect price action to remain choppy in the near term,” commenting that “another attempt to break the highs in May and a test of $1,800 is on the cards for gold, but it is quite possible that this happens after another look at the downside first.” Strong dip-buying will help the metal rise again following any weakness, the bank adds.
Getting exposure to gold would seem to be a sterling idea, then. And at current prices Centamin is an attractive way to do this. As well as trading on a low forward P/E ratio of 13 times, it sports a dividend yield north of 5%. This is a safe haven that could help boost your ISA returns in the near term and beyond, I feel.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
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*Please be aware that dividends are variable and not guaranteed.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.