When this summer began, Bitcoin was enjoying the most impressive price momentum it had seen since its remarkable 2017 run. In July, it surged above the $13,000 mark for the first time since early 2018. Since then, it has encountered volatility as concerns over new regulatory measures seemed to have spooked speculators. Of note were the disparaging comments made by Donald Trump and his Treasury Secretary Steven Mnuchin. Comments from the latter appeared to hint at future action by US regulators.
It’s a gut punch for Bitcoin bulls, as the digital currency had started to earn back its reputation as a viable safe haven. The US-China trade war, slowing global growth, and a dovish turn from central banks have combined to create an uncertain environment for investors. As it stands today, I’m not feeling great about Bitcoin’s momentum in the face of more regulatory pressure.
There is a ‘safe haven’ I feel good about targeting right now though — gold. The yellow metal has continued to build on its summer momentum in July. Its spot price moved above $1,400 for the first time in over five years. The promise of rate cuts from top central banks in the developed world holds huge promise for gold going forward.
These are some of the reasons I’m bullish on Centamin (LSE: CEY). Its shares have climbed 7% over the past year as of close on July 29. The gold-miner released a first-half production update that gave the stock a boost in the latter half of July.
Its most significant asset, the Sukari gold mine in Egypt, saw its production jump 8% year-on-year to 234,096 ounces. The company maintained its annual guidance for the year. It still forecasts gold production between 490,000 and 520,000 ounces at cash costs of $675 to $725 per ounce. However, Centamin is projecting that costs will come down due to the increase in its production profile.
It’s good news for a stock that has failed to generate the kind of momentum investors are hungry for, especially when we consider the strength in gold’s spot price in 2019. Still, those who bought after its sharp February 2019 dip have been rewarded. In its 2018 report (released in February), its production fell 13% year-on-year to 472,418 ounces. A strong balance sheet was one of the few positive takeaways from the full-year report. In its recent production update Centamin reiterated that it will carry no debt, no hedging, and cash and liquid assets of $327m into the rest of the year.
Centamin slashed its dividend to 5.5p per share on an annual basis in 2018, compared to 12.5p in the prior year. I’m hoping to see a return to form after this recent report. It is always nice to collect extra income in the volatile precious metals space.
The stock had a price-to-earnings ratio of 23 as of close on July 29 and I’m bullish on it after this update and due to the positive macro conditions for gold.