Buying gold, or gold mining stocks, is a popular play in times like these. I’m considering investing in metal digger Centamin (LSE: CEY) as inflation ravages the value of paper currencies and boosts the outlook for hard currency gold.
Bullion values haven’t soared so far due to fears of severe moves by central banks to tame inflation. Such unexpected action is a real risk which the move by Norway’s central bank this week perfectly illustrates. On Thursday, it hiked rates by the largest margin for 20 years, to 1.25%.
I’m still thinking of tailoring my portfolio for a sudden rise in gold values. And I’d do this by snapping up Centamin.
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I like the company’s ultra-low price-to-earnings (P/E) ratio of 10.1 times. I also think it’s a better choice than buying physical gold, or a financial instrument like a gold ETF. This way I can receive a dividend as well as potentially ride a soaring share price. Centamin’s dividend yield by the way sits at a large 5.9%.
Inflation and other issues
I’m not convinced by the effectiveness of central banks in fighting the current inflationary boom. Frantic rate rises haven’t, so far at least, stopped inflation gauges in major regions hitting new multi-decade highs each month.
The pressure on central banks to cool their aggressive actions might mount too as recessionary risks increase. Tepid action from the Bank of England last week (when it raised rates just 0.25%) illustrates the difficult decisions policymakers currently face.
Meanwhile, a worsening Covid-19 crisis has the potential to deepen supply chain problems and boost inflation further. So does a long war in Ukraine that might drive up key commodity prices.
I wouldn’t just buy Centamin to own for the short-to-medium term either. I think the business could prove an excellent long-term pick as it ramps up mining production. It remains on course to produce 430,000-460,000 ounces of gold in 2022 and is on the road to eventually dig out half a million ounces per year.
Another inflation-resistant share I’d buy!
Gold isn’t the only precious metal that could soar in this high-inflation environment. Platinum group metals (PGMs) might also rebound strongly again before too long. It’s why I’m considering adding Sylvania Platinum (LSE: SLP) to my portfolio as well.
Like Centamin, this platinum producer carries a rock-bottom valuation. It trades on a forward P/E ratio of just 3.9 times. In addition, its dividend yield stands at a solid 5.6%.
I’d buy Sylvania even as weak economic conditions threaten industrial demand for its product in the near term. And I’d look to hold its shares for the long haul too.
I think demand for pollution-battling metal platinum could soar as the fight to reduce car emissions increases. I also reckon off-take of its material could soar over the next decade, thanks to its critical role in hydrogen production.
