Losing its Luster
Always volatile gold prices have been on a slow decline for most of the last six months. However, that descent picked up steam recently on economic news.
Usually, economic concerns drive up the price of gold. However, the economic troubles in Cyprus have led that nation to sell the yellow metal. Adding more supply to a commodity market is never a good thing. Moreover, easing inflation concerns in the United States have also taken a toll.
According to Bloomberg, gold has had a 12-year run of positive returns. That’s impressive for any financial asset, so it isn’t surprising that the commodity is taking a breather so far this year. However, the question investors must ask is if this is a blip or will it turn into a full on blood bath?
For investors who think the sell off is a temporary turn of events, here are three stocks to look at now:
A Construction Discount
Barrick Gold Corporation (USA) (NYSE:ABX) is one of the world’s largest gold miners. It also has operations in silver and copper. The company’s big issues today are the falling price of gold and the construction of a massive project that isn’t going very well.
While there is little Barrick Gold Corporation (USA) (NYSE:ABX) can do about the price of gold, mine construction is another issue. The company actually has two notable projects, one in the Dominican Republic that appears to be going reasonably well and another spanning the border of Argentina and Chile. It is the latter mine that is causing the most trouble.
Chile has stopped the construction on its side of the border because of concerns about the mine’s impact on glaciers. Argentina is concerned about the same issue, but hasn’t stepped in to stop construction. And dust control is also being brought up. This mine is massive and would materially increase the company’s output, so delays are a big problem. If the mine never opens, it would be an even bigger issue.
The sell off now has the shares yielding over 3.5%. While gold’s fall could clearly impact the sustainability of the dividend, Barrick Gold Corporation (USA) (NYSE:ABX) has long survived such price volatility. Construction news is likely to be the bigger issue for the shares. In fact, the shares could rally if its Argentina/Chile project gets back on track.
A Dividend Tied to Gold
Newmont Mining Corp (NYSE:NEM) is another of the world’s largest gold miners. A drop in gold prices is probably the biggest concern facing these shares. However, older mines is a secondary concern. As properties age, they tend to produce less ore. That basically requires that new assets be brought on line to make up for the declining assets.
