July22,2019 BARRON’S 9
A Return Visit to Earlier Stories
Why Gold Is Regaining Its Luster
GOLD PRICES HIT THEIR HIGHEST LEVEL
since 2013 this past week, an indication
that investors increasingly view the of-
ten-maligned metal as a good alternative
to paper money and government bonds
at a time of accommodative monetary
policies around the world.
Gold climbed to $1,446 an ounce be-
fore ending on Friday at $1,425. The
metal is up about 1% on the week and
12% so far this year, but remains well
below its peak of $1,900 an ounce in 2011.
With gold rallying, gold stocks got a
lift. The VanEck Vectors Gold Miners ex-
change-traded fund (GDX) gained 7% for
the week, to $27.98. It is up 32% this year,
outperforming gold.
Mining stocks tend to be more volatile
than gold because their earnings are
sensitive to changes in the price of the
metal. The largest two stocks in the Van-
Eck ETF are Barrick Gold (GOLD) and
Newmont Goldcorp (NEM).
Barron’s argued in a cover story last
September that gold, then trading near
a low for 2018 at around $1,200, looked
appealing, as did depressed gold stocks.
Gold tends to do well when inflation-
adjusted interest rates are low. That is
the case now, with $13 trillion of govern-
ment bonds (mostly in Europe) carrying
negative interest rates and the bench-
mark 10-year Treasury note at just
2.06%. The Federal Reserve, meanwhile,
appears certain to cut short rates later
this month; the only question seems to
be how much.
Ray Dalio, founder of the world’s big-
gest hedge fund, Bridgewater Associates,
recently promoted gold as an investment
that does well “when the value of money
is being depreciated and domestic and
international conflicts are significant.”
Gold is also the anti-dollar. President
Donald Trump wants a weaker dollar to
make U.S. exports more competitive.
And gold looks cheap relative to Bitcoin,
which has more than doubled this year,
to around $10,000.
Historically, gold has been a store of
value and a reasonably good inflation
hedge. There are an estimated six billion
ounces of gold in the world, worth more
than $8 trillion. Gold newly minted each
year represents less than 2% of the total
supply. Many major producers are strug-
gling to maintain output given a dearth
of world-class projects and political and
environmental obstacles. Central banks
led by Russia had their highest first-
quarter purchases of gold since 2013.
Gold stocks aren’t cheap, but they
rarely are. Investors typically give them
“option” value, as earnings tend to get a
boost when gold prices rise. Barrick
Gold, at $17, is up 27% this year and now
trades for 39 times projected 2019 earn-
ings of 44 cents a share, while Newmont,
at $39, changes hands at 28 times esti-
mated 2019 earnings of $1.39 a share.
Barrick could be the better bet. Both
companies are benefiting from the com-
bination of their large Nevada opera-
tions, which should produce $500 million
in annual benefits, with Barrick getting
more than 60%.
CIBC analyst Anita Soni resumed cov-
erage of Barrick earlier this month with
an Outperform rating and a $20 price tar-
get, citing “significant upside potential
with the Randgold merger [at year-end
2018] and Nevada JV now completed.”
Investors may want to get direct ex-
posure to gold through ETFs like the
SPDR Gold Shares (GLD). Then there
are mining-stock ETFs like the GDX and
the VanEck Vectors Junior Gold Miners
ETF (GDXJ), as well as individual
stocks.
Gold exposure of 5% to 10% in a
portfolio might not be a bad idea now.
—ANDREWBARY
Precious
The spot price of gold since
November 2018
Source: Bloomberg
Nov. ’18 Apr ’19 Jul ’
1150
1200
1250
1300
1350
$
Therearenearly60millionpeopleproducing$2.13TrillioninGDP(that’sthesizeof
India!)holdingthekeytoyourgrowthopportunities—U.S.Latinos.
Ifyouwanttogrowyourbusiness,yourmarketshare,andyourprofitsnowandforyears
tocome,aswellasunderstandwheretoinvest,looknofurtherthanL’ATTITUDE.
Behereforthereleaseofthe2019LatinoGDPReport.
Getthefactsanddatayouneedfromaworld-classslateofCEOs,celebrities,economists,
businessleaders,educators,entrepreneurs,journalists,andpoliticiansdiscussingThe
NewMainstreamEconomy.OnlyatL’ATTITUDE.
2019PARTICIPANTS (moretobeannounced)
SOLTRUJILLO, Chairman,CEOTrujilloGroup&Co-Founder,L’ATTITUDE
GARYACOSTA, Co-FounderandCEOofNAHREP&Co-Founder,L’ATTITUDE
MARCBENIOFF, Chairman&co-CEO,Salesforce
OSCARMUÑOZ , CEOUnitedAirlines
MARYDILLION , CEOUltaBeauty
MARYMACK , SeniorExecutiveVicePresidentandHeadofWellsFargoConsumerBanking
EMILIOESTEFAN , 19xGrammyAwardwinningProducer
ZOESALDANA , Actor&Entrepreneur
WILLIAMLEWIS , ChiefExecutiveOfficer,DowJones&Publisher,TheWallStreetJournal
TOMNIDES, ManagingDirectorandViceChairmanofMorganStanley
EUGENIODERBEZ, Filmmaker,ActorandPartner,3PasStudios
CESARCONDE , ChairmanofNBCUniversalTelemundoEnterprisesandNBCUniversalInternationalGroup
CARLOSGUTIÉRREZ ,Chair,AlbrightStonebridgeGroup,FormerU.S.SecretaryofCommerce
ANANAVARRO, GOPStrategist,CommentatorCNN
TONYGONZALEZ , ProFootballHallofFamerandFOXNFLAnalyst
MARIATERESAKUMAR, President&CEO,VotoLatino
ROBERTRODRIGUEZ , Filmmaker&Entrepreneur
PATGRADY, SequoiaPartner
THADDEUSARROYO , CEOatAT&TBusiness
GUILLERMODIAZ,JR , SVPofCustomerTransformationatCisco
RALPHDELAVEGA , FounderandChairmanoftheDeLaVegaGroup
DAVIDSTOCKMAN , FormerDirectoroftheOfficeofManagementandBudget
ALCARDENAS, Lawyer&PoliticalStrategist
MIKEFERNANDEZ , Immigrant,Entrepreneur&Philanthropist
BENODELL, ProducerandPartner,3PasStudios
PLUS
2020PRESIDENTIALCANDIDATECONVERSATIONS
MATCH-UP: WhereLatinXEntrepreneursandCapitalMeet
LATINASWITHL’ATTITUDE : America’sNewEconomicForce
L’ATTITUDEGALA&SPECIALRECOGNITION
TAP INTO THE MAJOR SOURCE
OF GROWTH IN AMERICA —
THE NEW MAINSTREAM ECONOMY
JoinUsatL’ATTITUDEinSanDiego,CA
September26-29,
REGISTERATL’ATTITUDE.NET
ADVERTISEMENT