Them thar hills...Most folks know that I have long suggested that an ideal allocation of one's investable assets would be a solid 5% in physical gold, that would have to be rebalanced once a year or so, and then another 0% to 5% in what we call "paper gold". That's the stuff of exchange traded funds, mutual funds, and/or futures. That way, an investor is invested in gold to the tune of 5% to 10%, the first 5% undeniable in value should one at some point be forced to actually use the yellow metal not just as a hedge against inflation but as money itself. The second 0% to 5% would obviously be less than useful in such a catastrophic situation, but does allow investors to easily adjust exposure to the shiny stuff on a much more short-term basis.
Everyone has a strategy. For what it's worth, this one is mine. The miners? If invested, and I am not always, they are in the equity book, and I do not count them against this allocation. I have been quietly accumulating two miners, only one with a focus on gold, as a materials based play against a declining U.S. dollar that I started to doubt would actually start rolling. These would be Freeport-McMoRan (FCX) just in case there's an infrastructure building component built into either a Trumpian or Biden-based future, and Barrick Gold (GOLD) , as in my opinion... the best in class gold miner, especially after merging with Randgold, the firm I had previously felt held that title.
Barrick Gold Reports
I thought it odd when Barrick Gold CEO Mark Bristow last week mentioned that the company might move its main listing from Toronto to New York, though this has been clarified. Apparently there are no current plans in place to move the listing, I had at first misread the story as if the firm itself wished to move its headquarters from Toronto to New York. Oh, I could see moving to the U.S., but I had no idea that all roads into and out of New York still ran both ways. I only hear of people moving out.
That the mention was only about listings, the New York Stock Exchange remains in my opinion, the premier equities exchange on the planet, and the old open outcry two-way ongoing auction markets will forever be the fairest market model to all parties involved that has ever existed. Think about it. All bids and offers needing audible exposure at a centralized point of sale in order to participate. You're not going to top that.
For the firm's second quarter, Barrick Gold reported an adjusted EPS of $0.23. This beat expectations by a nickel. This was good for earnings growth of 156%. The firm also posted revenue of $3.06 billion. This number also beat consensus, while exhibiting growth of 48.5%. Free cash flow hit the tape at $522 million, nearly growing 10% from the year ago quarter and well above expectations of $481 million.
Year to date gold production now totals 2.4 million ounces, keeping the firm on track to hit annual guidance of 4.6 million to 5 million ounces. Taking precautionary measures in response to the coronavirus pandemic did have an impact on all-in expenses. That number increased to $1,031 per ounce partially offsetting a 31% increase in the firm's average gold selling price to $1,725/ounce.
Oh, one more thing... Barrick increased the quarterly dividend from $0.07 to $0.08 per share creating a forward yield of 1.11%. The new dividend will be payable on September 15th to shareholders of record on August 28th, with the stock going ex-dividend on Monday, August 31st.
I think what readers will see here is a basing pattern that had been created by a triple top back in April and May, and then support found close to a 38.2% Fibonacci retracement. The shares have toyed with breaking out of this base since mid-July.The fact that the current day's action started out using that spot for support is encouraging. If this were a normal stock, my price target would be around $34. In these times, I don't sell these anywhere if the commodity stays hot in dollar terms.