Barrick: Gordon's Gold
11/21/2003 12:00 am EST
We're glad to add Gordon Pape—one of Canada's leading advisors—to our coverage at the Digest. One area under his expertise is natural resources. He says, "Gold has been a hot topic due to continued weakness in the US dollar. The growing mess in Iraq and heightened concerns about terrorism have also added fuel to the demand for bullion." Here's his outlook and latest Stock of the Month.
"Where do we go from here? We asked guest contributor Yola Edwards, one of Canada's leading technical analysts, to read her charts and provide some insights into the probable future direction of the yellow metal. Here are her conclusions. Yola Edwards writes: ‘A quick look at the Philadelphia Gold and Silver Index ($XAU ) also reveals a saucer bottom. In June, the XAU, jumped above 75. That was a breakout above its eight-year downtrend line and indicated the beginning of a possible new uptrend. In the short term, though, the chart indicates that the index is slightly overbought. So if you're looking for a place to buy gold stocks, use the XAU as a possible guide and buy when it pulls back to around the 95 level. You could also average down at the 90 level if need be as it looks like gold may glitter now. Longer term, the index could rally to the pattern's technical measurement target of 145, so for the very long-term investor this sector should yield exceptional returns. The bottom line on gold is that the indicators suggest a period of consolidation, followed by a new upward move which could carry bullion as high as $553. The great unknown is the time it will take to achieve this.
"The largest component of the Philadelphia index by market capitalization is Toronto-based Barrick Gold, which trades on both the New York exchange (ABX NYSE), and the Toronto exchange (CA:ABX Toronto). The prices cited here and in the chart are based on the Canadian price.Barrick, our Stock of the Month for November, is Canada's largest gold producer and the third-biggest producer in the world with operations in the US, Peru, and Chile. The stock's long-term chart reveals a double and triple bottom in place, indicating the lows in its share price have been seen. Though the stock could rally to Can$28.33, it is overbought in the short-term. First support and possible buy opportunity is seen at $25.75, with major support at about $23. Meanwhile, a close above $36.05 will suggest a target of $51 in the next 12 to 18 months. Buy at $25.75 or below."