Should Barrick Gold (TSX:ABX) Stock Be on Your Buy List Today?

Gold is extending its gains, and that bodes well for the industry’s largest players.

| More on:
Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)

Image source: Getty Images

The gold sector is finally showing signs of life after a multi-year slide that put most of the gold miners off the radar of Canadian investors.

Gold resurgence

The price of gold currently trades at US$1,590 per ounce compared to its 12-month low around US$1,270. Gold briefly topped US$1,600 earlier this month and could potentially break through that level again and take a run at new six-year highs in the coming weeks.

Pundits are even speculating the 2011 highs above US$1,900 could be within reach in 2020, given the numerous financial and geopolitical risks that are driving gold demand.

Recent support is fuelled by fears connected to the coronavirus outbreak in China. This is along with tensions in the Middle East, the China-U.S. trade war, Brexit, and a global trend toward negative rates on government debt.

Global financial markets are reacting to the potential impact of the coronavirus on economic activity. The longer the virus disrupts trade and consumer and business spending, the more likely countries will begin to reduce economic growth targets. As a result, investors are starting to move funds out of higher-risk positions and into safe-haven assets.

The oil market is already pricing in reduced demand. For example, WTI oil is trading at US$51.50 per barrel compared to more than $63 earlier in January and is approaching a 12-month low.

Cash is also flowing into government bonds and driving down yields. The U.S. 10-year treasury yield is at 1.53% compared to $1.91 a month ago. It too is approaching its lowest point in the past year.

In this environment, it isn’t a surprise to see gold catching a bid. The yellow metal is widely viewed as a safe place to protect wealth. This is particularly true for investors who hold the bulk of their money in currencies other than the U.S. dollar.

Gold is priced in the American currency, and there is a risk that central banks around the world will ramp up interest rate cuts to try to boost their domestic economies. This can lead to a global race to devalue currencies, which can erode wealth and undermine purchasing power in the international markets. Holding gold is one way to protect against a devaluation of a currency against the dollar.

Should you buy Barrick Gold?

The medium-term outlook for gold is positive, given the basket of concerns hitting markets. The gold miners tend to move more than the price of gold, so it would make sense for investors who are bullish on gold to consider adding gold stocks to their portfolios.

Barrick Gold (TSX:ABX)(NYSE:GOLD) is up about 50% since the end of May last year, but more gains should be on the way. The company’s CEO recently said that Barrick could effectively wipe out its net debt by the end of 2020 if gold holds its gains. That would be a huge milestone for a company that was on the brink just a few years ago with debt of US$13 billion.

Barrick raised its dividend late last year and the elimination of the debt burden would free up cash to boost the payout. The company currently owns five of the top 10 mines on the planet and had 2019 gold production of 5.5 million ounces. Barrick is also a major copper producer and copper could see a sharp price rise in the coming years, as the trend to renewable energy picks up pace. Wind turbines and solar panels use significant amounts of copper.

Barrick Gold trades at just $24.50 per share. It wouldn’t be a surprise to see the stock top $30 by the end of the year.

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 Andrew Walker owns shares of Barrick Gold.

More on Metals and Mining Stocks

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

Gold bars
Metals and Mining Stocks

Will Gold Stocks Rally in 2024?

Down almost 30% from all-time highs, Franco-Nevada is a gold mining stock trading at a discount to consensus price target…

Read more »

A miner down a mine shaft
Stocks for Beginners

Canadian Mining Stocks: Buy, Sell or Hold?

Canadian mining stocks have seemed like such a strong investment, but with shares down significantly this year, what should we…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Great News for Gold Stock Investors!

Gold has hit an all-time high! Which is good news for some gold stocks, and really good news for others.

Read more »

Gold bullion on a chart
Metals and Mining Stocks

If Gold Prices Continue to Climb, These 3 Stocks Could Skyrocket

Market certainty and geopolitical tensions typically enhance the demand for gold, and this rise is reflected in a wide range…

Read more »

gold stocks gold mining
Metals and Mining Stocks

Why Agnico-Eagle Stock Rose 5% on Monday

Agnico-Eagle stock is up 15% in the last year as inflation fears and elevated geopolitical risk are sending gold prices…

Read more »

gold stocks gold mining
Metals and Mining Stocks

Add Some Bling to Your TFSA With This Gold Mining Stock

Agnico Eagle Mines (TSX:AEM) stock looks too cheap to ignore as gold looks to make its next move.

Read more »

four people hold happy emoji masks
Metals and Mining Stocks

Got $200? 2 Lithium Stocks to Buy and Hold Forever

Lithium stocks may not be in the headlines like chip stocks, but they have just as much growth potential over…

Read more »