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3 Near-Term Plays on Gold Stocks

News from Barrick Gold shapes portfolio plays


Gold shares closed mixed on Wednesday despite the stimulus chatter and a rising stock market bouyed by optimistic news on both the eurozone crises and sluggish U.S. economy. At the same time, some interesting news came to light that has me thinking about the market and our positions.

gold-trading 185A flat bullion price had something to do with the mixed results, but traders were also unsettled by news that Barrick Gold (NYSE:ABX) is dismissing CEO Aaron Regent, replacing him with Jamie Sokalsky, the firm’s CFO, who has been with Barrick since 1993.

Curiously, Barrick’s news release cited the company’s lagging share price (“we’re disappointed”) as a factor in the shakeup.  I can’t recall the last time a mining boss was cashiered for that reason.

On its face, it’s a good sign that the board is upset about ABX’s low stock price.  So I’m retaining my buy recommendation on the shares, a selection of our main model portfolio.  However, I’m lowering my price limit because the Regent firing could mean that Barrick has other “restructuring” moves in the works.

The Barrick news shouldn’t prevent the gold shares, as a group, from rebounding further, but it could prompt traders to be more conservative in their evaluation of the stocks’ near-term potential.

As a result, and just to play it a little more safely, I am going to trim my buy limit on Newmont Mining (NYSE:NEM), a Niche holding in our portfolio, and the buy ceiling on Aggessive Play Market Vectors Junior Miners EFT (NYSE:GDXJ) will drop, too.

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