Barrick Gold Presents a Solid Alternative to Owning Physical Bullion

There are different ways to get exposure to precious metals. Sure, you can own physical bullion – but you can also invest in Barrick Gold (NYSE:GOLD) as GOLD stock is strongly correlated with the yellow metal’s price movements.

A gold bar along with some coins made of precious metals. gold stocks
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Here’s something you’re probably heard: the Federal Reserve called inflation “transitory.” If you’re a skeptical type, though, then maybe you’re not prepared to take what the Fed says at face value.

What does that have to do with GOLD stock? The answer is: everything. If you’re going to dabble in the precious metals space, then the U.S. dollar’s devaluation is a significant, ongoing process.

And beyond the macro-level factors, you’ll also want to closely examine Barrick as a company. Without a doubt, you’ll find that it’s a respected miner that offers reliable shareholder value.

A Closer Look at GOLD Stock

Earlier, I alluded to Barrick shares’ strong correlation to the price of physical gold.

It’s not an exact one-to-one correspondence. However, the price action of the stock versus the metal has been quite similar in 2021. Surely, that’s not a coincidence.

Both physical gold and Barrick shares dropped in January and February, and then recovered from March through May. Then, in June they fell in tandem.

And while the gold bugs are trying to push the metal above $1,800 and keep it there, the Barrick bulls are battling over the $20 level.

Yet, despite the close price correlation, GOLD stock isn’t the same as physical gold.

For one thing, physical gold doesn’t pay a dividend.

In contrast, Barrick shares provide a forward dividend yield of 4.44%. That compares favorably to many blue-chip companies, actually.

Moreover, you can’t apply certain valuation metrics to physical gold.

On the other hand, we can check the trailing 12-month price-to-earnings ratio for Barrick. And, it happens to be extremely reasonable at 15.01.

Reaffirming Its Role

Among gold miners, Barrick is a known leader.

Heck, even Warren Buffett – who disdainfully called gold a “magical metal” – famously took a position in Barrick through his company, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B).

Yet, even established leaders have to continually reaffirm their strength. After all, there’s no shortage of competition in the mining space.

Fortunately for the company’s stakeholders, Barrick still has the data to back up its leadership role among hard-asset miners.

For example, during 2021’s first quarter, Barrick recorded a per-ounce all-in sustaining cost (AISC) for gold of $1,018.

Even after the recent dip in the physical gold price, Barrick’s AISC indicates that the company is getting the minerals out of the ground in a cost-efficient manner.

According to the company, Barrick is on track to achieving its production targets. That’s exactly what current and prospective investors should want to hear.

Not Just Gold

Okay, so the full name of the company is Barrick Gold. But, don’t let the name mislead you.

Maybe they should call it “Barrick Minerals,” as the company is also a notable copper miner.

For the first quarter of 2021, Barrick reported a per-pound AISC for copper of $2.26.

That’s impressive, as the per-ounce cost of copper (according to the futures contracts, at least) was $4.34 on July 5.

And get this: in 2021’s first quarter, Barrick’s copper revenues increased by 31% compared to the prior quarter.

Barrick had to admit that this was partially due to “stronger copper prices driving solid profitability.”

Still, the company also acknowledged its “disciplined cost control” throughout the quarter – which, I believe, is a major contributor to Barrick’s continued profitability.

The Bottom Line

Inflation is here, and it might persist for a while. Owning physical gold is one way to hedge against the dollar’s devaluation.

But, there’s an alternative to owning bullion – and it pays a solid dividend.

Just be aware that a position in Barrick isn’t a pure gold play, as the company also profits from copper mining – and that’s not necessarily a bad thing at all.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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