One statistic released by the government’s Commodity Futures Trading Commission shows that the net position (whether traders are bullish or bearish based on their holdings) for gold traders dipped into negative territory for the first time in over three years.
One of the most difficult challenges that investors have with value stocks is to hang onto them when the share price goes down. If the underlying value is there, however, then the day-to-day share price is just a sentiment indicator. This is the case with Barrick today.
Fundamentally, Barrick is strong, with a solid balance sheet, capable management and good mines. While there is a risk that some of their mines get nicked by corrupt governments in shaky countries, Barrick has generally been able to keep the financial impact to a minimum.
Barrick reported reasonable results, helping to support the case that the company is fundamentally solid. And, at just over 16/share, the stock discounts a fairly dour future.
Commodity gold has been hit by the strong dollar and rising interest rates. These are two of the drivers of gold prices, and both are moving in the wrong direction (pressuring gold). What we see, though, is that gold has remained remarkably resilient even in the face of these pressures.
Any relenting by the Fed on its campaign to rein in inflation would likely push gold substantially higher. This might not happen in the immediate future, but it would appear inevitable despite the Fed’s tough talk.
With Barrick, we are left with a solid company whose shares are out-of-favor and undervalued. For reference, the last time GOLD traded at this price, commodity gold traded at $1,250/ounce or so. I personally own Barrick shares and am keeping my position and the Buy rating. Patience, however, is required.