What a great time for investors wanting exposure to the gold price to go shopping. Bullion’s recent duck below $1,500 per ounce and its failure to remount this key level has caused the share prices of many of London’s quoted precious metals diggers to fall.
Centamin (LSE: CEY), for one, has seen its share price drop 23% since the start of September. And I consider this to be a cracking buying opportunity.
Brexit bothers
So why has gold’s price ascent ground to a halt? Since striking six-and-a-half-year peaks of $1,540 per ounce in August, giddy buyer demand has moderated slightly reflecting, in part, some light profit taking and signs of improved risk appetite across financial markets.
That said, it seems as if a floor has been built around the $1,470 per ounce marker as investors adopt a wait-and-see approach before embarking on fresh bouts of buying. And there are seemingly plenty of factors that could turbocharge yellow metal demand in 2020, if not before.
Most pertinent for UK investors is the prolongation of Brexit uncertainty following prime minister Boris Johnson’s failure to get his withdrawal agreement with the European Union over the line in Parliament this week. This probably now means an extension to Britain’s stay in the continental club until the end of January at least.
Moreover, it also brings forward the likelihood of a general election either late this year or in early 2020, a scenario which creates a multitude of Brexit combinations and resurrects the possibility of an economically-disastrous no-deal exit. It’s also likely in this climate that economic data will also continue to disappoint — indeed, latest GDP numbers showed the economy fell back into contraction in August.
More gold drivers!
Of course, though, there’s a multitude of catalysts for gold prices beyond these shores to be braced for in 2020.
Looking across the Atlantic, that includes the US presidential election next November, a run-off which promises to be nip-and-tuck between Donald Trump and a yet-to-be announced Democratic challenger. That’s assuming the current White House resident survives what is proving to be a tumultuous impeachment enquiry.
Markets should also be braced for the long-running trade saga between the US and China to stretch on, a dispute which has worsened with Beijing trying to claw back $2.4bn of tariffs from its rival under WTO rules. Add in geopolitical instability across the Middle East, a string of worsening economic gauges from across the globe, and the likelihood of more central bank rate cuts, and it becomes apparent why many brokers are tipping gold prices to boom through next year and beyond.
A brilliant buy
Now that rash selling of Centamin stock leaves the business looking more than a little appetising, in my opinion. City predictions of a 48% profits leap in 2020 results in a bargain-basement forward price-to-earnings growth (PEG) readout of 0.3. But this isn’t the only reason to celebrate as broker expectations of more dividend growth create a jumbo 6.4% yield too.
Centamin was recently up 5% in Wednesday trading after it affirmed its full-year production target of 490,000 ounces for 2019, despite a fall in third-quarter output. Though, for the reasons above, I reckon there’s plenty of scope for it to continue surging.