Though gold popped last week as investors continued to seek safe havens, it’s been a disappointing start to the week for the precious metal, which just hit a six-year high. However, with any number of market stressors circling the financial landscape, traders looking for short-term upside may soon have opportunities to cash in aplenty. Meanwhile, long-range investors have at least one very promising dividend-paying option to mull over.
A gold bull run is still on the way
The stock in question is Barrick Gold (TSX:ABX)(NYSE:GOLD). Paying a modest but not unwelcome yield of 1.02%, Barrick Gold is a favourite of the gold pundits who have been comparing it favourably with that other mining giant, the newly merged Newmont Goldcorp (TSX:NGT)(NYSE:NEM). In terms of high-grade reserves, the argument goes, Barrick Gold’s reserves and resources outstrip those of the latter company, which could lead to long-term lower production costs.
While Newmont Goldcorp pays the higher dividend yield at 1.47%, the perceived competitive advantage of Barrick Gold’s larger volume of higher-grade resources may be the element that tips the scale in favour of Barrick Gold. In other respects, Newmont Goldcorp appears the more competitive stock: aside from its higher dividend yield, it also boasts a larger market cap, greater reserves, and higher annual gold production.
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High-grade reserves and a windfall add up to a buy
In summary, Barrick Gold has the greater volume of high-grade reserves after the Rangold acquisition. The company also just got a nice little share price bump this week after its joint venture with Antofagasta PLC was awarded a payout over a mining lease dispute in Pakistan. The World Bank ordered the country to cough up a cool US$5.4 billion in damages to the jointly operated Tethyan Copper Company.
Whether an investor plumps for Barrick Gold or Newmont Goldcorp today, the consensus still points towards a gold bull run during the remainder of the year and a positive long-term outlook. Prices could hit US$1,500 an ounce next year, with considerable upside later in 2019. However, the long-term option is perhaps the most compelling, with super-miners like Newmont Goldcorp and post-Rangold merger Barrick Gold likely to keep growing.
Now that the general opinion has swung around from bearishness to a bull mentality, with gold prices touching US$1,400 — unseen since six years ago — the stage is being set for an extremely lucrative period in the precious metals space. Throw in the ongoing round of geopolitical tensions and the Sino-American trade war, and you have a perfect storm just right for gold investors both seasoned and new.
The bottom line
Investors seeking a safe haven in times of widespread economic fear are always going to find a solid option in gold, with the commodity an excellent way to diversify a portfolio laden with banks and utilities. While there is a range of high-quality precious metal miners out there to choose from, either of the two newly amalgamated mega-miners would be strong options, with Barrick Gold arguably the favourite for a long position in a classically defensive, low-risk asset.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.