Barrick Gold (TSX:ABX): Is it a Good Way to Invest in Gold Right Now?

Investing in gold stocks like Barrick Gold (TSX:ABX)(NYSE:GOLD) might be a great way to gain exposure to gold right now.

| More on:
Gold bars

Image source: Getty Images

The Canadian economy is slowly recovering from record inflation rates. High inflation rates typically lead to higher commodity prices across the board. You would assume that gold and silver prices might surge in such an environment, leading to a boom for metals and mining stocks. And yet gold prices have struggled to break to new all-time highs.

The series of interest rate hikes by the U.S. Federal Reserve and the Bank of Canada (BoC) might have put a dent in the inflationary environment. Still, there is a long way to go before reaching target inflation rates.

Barrick Gold (TSX:ABX)(NYSE:GOLD) is the top gold stock listed on the TSX. Today, I will discuss why investing in this gold-mining company might be an excellent deal for you to consider right now.

Gold in an uncertain economic environment

The broader economic environment has been unpredictable since the pandemic struck. Just as the world began moving into a post-pandemic era, the Russia-Ukraine war threw everything out of balance. Just like the overall economic climate, the next move for gold is a question mark.

Gold has always been seen as a great store of value. People usually invest in gold as a safe-haven asset, especially during uncertain economic environments. However, buying and holding gold might not be as rewarding as investing in equity securities for the long term.

People do not buy and hold gold to become rich. Rather, they do it to preserve their wealth and diversify their investment portfolios through commodity exposure.

Having some gold in your portfolio can be a good way to protect your financial future, just in case another black swan event comes along. Many market experts anticipate a recession on the horizon, and it would be natural for investors to be anxious. Preparing your portfolio by gaining exposure to gold might be a good idea, but investing in a gold stock may be a safer way.

Barrick Gold stock

Barrick Gold is a $36.19 billion market capitalization gold mining company headquartered in Toronto. The company boasts strong gold and copper mining operations across 16 operating sites in 13 countries worldwide.

As of this writing, Barrick Gold stock trades for $20.42 per share and boasts a sustainable 2.56% dividend yield. It is down by 39% from its 52-week high and might qualify as an undervalued stock at current levels.

Several other gold stocks pay investors their shareholder dividends, but Barrick seems like a stronger bet to gain exposure to the rare yellow metal’s performance. Barrick Gold stock has a 1.09 price-to-book ratio multiple, suggesting a depressed valuation compared to the industry average of 4.2. Barrick Gold stock has a solid current ratio of 3.95 and a 33.63% payout ratio, showing a solid balance sheet.

Foolish takeaway

As of this writing, gold trades for US$1,727 per ounce, which is significantly lower than the US$2,000 barrier it crossed for the first time in August 2020. Suppose that gold bounces back and regains momentum. Gold-producing companies like Barrick Gold are bound to see their profit margins soar. Being invested in the top gold stock might translate to excellent returns.

A benefit of owning gold stock over gold bullion could be its liquidity. Owning gold stock means you can sell it when it is no longer profitable and allocate your funds elsewhere without letting your money leave the market. Buying and selling physical gold is not as easy as trading gold stock.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Upwards momentum
Energy Stocks

Gold and Energy: Here Are Two of the Best Stocks to Buy Now

Gold and energy stocks are some of the best to buy now for very different reasons.

Read more »

Nickel ore is mined from the ground.
Metals and Mining Stocks

2 Top Commodity Kingpins to Hedge Your TFSA Portfolio

Consider Nutrien (TSX:NTR)(NYSE:NTR) and another top commodity play to hedge your TFSA portfolio right now.

Read more »

Business man on stock market financial trade indicator background.
Dividend Stocks

2 of the Best Stocks to Buy That Have Ultra-Safe Dividends

These two dividend stocks are among the best to buy now due to their reliability and the attractive passive income…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

These 2 Commodity Stocks May Be Super Cheap

Gold stocks and energy stocks appear to be very cheap. Interestingly, they're in opposite kinds of environment right now.

Read more »

TSX Today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Monday, September 19

With speculations about the U.S. Fed’s upcoming policy move and economic projections, TSX stocks could remain highly volatile in the…

Read more »

Gold bullion on a chart
Metals and Mining Stocks

2 Gold Stocks to Buy That Are Unbelievably Cheap

While plenty of stocks trade at significant discounts today, gold stocks and these two, in particular, are some of the…

Read more »

Dividend Stocks

3 Metal Commodity Stocks You Can Buy at a Massive Discount

Even though each metal market is different, the stocks representing three major metal commodities are simultaneously discounted right now.

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Is B2Gold Stock a Buy, or Could it Continue to Fall in Price?

With the price of gold nearing a two-year low, is the low-cost producer B2Gold stock worth a buy in this…

Read more »