Gold prices continue to climb after hitting lows last September, proving once again a great place to store cash can be in gold prices. However, an even better place is in the gold companies themselves.
With the S&P/TSX Global Gold Index up 7% in the last year and 26% since March, large gold miners are seeing a huge increase in returns. Yet perhaps one of the best has been Barrick Gold (TSX:ABX).
Why investors go to gold
Gold prices have remained steadily rising, as market uncertainty continues to weigh on the minds of investors. Experts believe the price will continue to climb over the summer, as banking institutions buy up the product as a safe choice.
It may be safe, but that doesn’t mean it’s growing. Gold itself just sits there — just like keeping your investments in cash. In fact, just like keeping your cash in an account, it doesn’t really create any income but merely keeps it safe.
That being said, miners of the product are certainly a great option instead. Gold miners do generate income and can take advantage of these higher prices — especially when financial institutions decide to buy it up. That is why investors should consider one of the world’s largest gold miners: Barrick stock.
Bright and shiny performance
Barrick gold certainly has been taking advantage of the rise in gold prices, beating out estimates for the first quarter recently. The company’s average realized gold prices hit $1,902 per ounce compared with $1,876 per ounce a year before. These higher prices helped the company along, even as production declined in the quarter.
Barrick stock brought in production at 952,000 ounces, down from 990,000 ounces a year before. Copper production also decreased to 88 million pounds from 101 million pounds last year. These came from a rough winter in northern Nevada, with maintenance also hurting the stock.
Even so, adjusted earnings came in at $0.14 for the quarter, beating estimates of $0.11. But Barrick stock wants more, and Chief Executive Officer Mark Bristow recently stated they’ll be fighting the Canadian government to achieve that.
Pushing back on foreign investment
Bristow recently stated there are opportunities to be had from foreign investment, specifically from China-backed companies. This comes as the United States and Canada both continue to attempt a clamp down on investments in the North American mining sector by foreign-controlled companies.
The government is doing this not just to hold on to money, but to also lower the risk of national-security concerns. Such investment has already been blocked by the Canadian government in the past. Barrick stock, meanwhile, already has partnerships in other parts of the world with Chinese-backed companies.
Bristow argues that it’s impossible to keep China out of the gold mining industry and, indeed, metals at large. The country is a large purchaser of the product, so Bristow states Canada should be seeking to deglobalize the two countries rather than divide them.
Bottom line
If investors are hoping for more growth, it could be hard come by. With mergers and acquisitions on hold at this time due to these government regulations, it could mean Barrick stock has a harder time finding growth opportunities. What’s more, with production down and gold prices eventually coming back to reality, share prices could soon fall.
As for now, Barrick stock remains down 5% in the last year, though it’s up 9% year to date.
