Barrick Gold Nails the Hedge

Hard Assets Investor submits:

By Julian Murdoch

It’s gold week around here at HardAssetsInvestor.com, so let’s take a look at a company that pulls the shiny stuff out of the ground. It happens to be one of the biggest players in this space, and it happens to have reported earnings this last Friday: Barrick Gold Corp (NYSE: ABX). (See earnings call transcript.)

Why look at a gold company if you are a commodity investor? It all depends on how you like to play. There are advantages and disadvantages to pick-and-shovel plays – we discussed some of them in Gold Vs. Miners back in October.

One of the interesting ratios we looked at was the price of gold compared with the value of the Amex Gold Miners Index (GDM). While this is an invented ratio, it’s worth tracking over time. Back in October, the ratio of the price of gold to the value of the Amex Gold Miners Index was above 1.5 – a high number, historically, implying that gold miners were cheaper than they’d been in years. In October, gold prices were in the $750 range, and the Amex Gold Miners Index was sitting around 500.

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