Barrick Gold, which is the largest gold mining company in the world by capitalization, ended Friday with a share price of $36.25 per share. Over the last year and a half, the gold investment landscape has been utterly upended. Individual sector index funds and mining stocks have had very different paths in this period. For Barrick Gold, it has been a mixed fortune. Conversely, the XAU index fund, which tracks all publicly traded companies that mine both gold and silver, has skyrocketed over the last year and a half.
As a result, the XAU index fund has blown up after sitting cold for 10 years. Indeed, it only ever traded above $40 back in the mid-1990s and almost reached $50 during the boom years of 2010-2011. This bullish momentum highlights the increasing resilience of the gold market. Increases since January 1, 2000 Gold is up an astounding 12.4 times. World gold mine production reached an all-time high in 2018. Since then, it has almost completely flat-lined, foreshadowing future supply woes for name-plate producers like Barrick.
Unlike the HUI index fund, which only tracks gold mining companies. In just over a decade since it was created, it has been a remarkable success, surging an unbelievable 11.8 times. For all Barrick Gold’s positive movement in the space, its current share price is about $21 short of its all-time high. This gap further exemplifies the high-stakes environment Barrick must operate in.
To meet these challenges head on, Barrick need to be prudent and not make some key blunders that would endanger its portfolio. Then, you have to hope there aren’t any detrimental government regulations that hurt profitability. Further, handle local community relations to avoid being extorted and keep a lid on costs. On top of this, Barrick wants to put shareholders first in the face of all these complexities.
Mark Twain’s famous quip about gold mining encapsulates the industry’s risks: “A gold mine is a hole in the ground with a liar standing beside it.” In this declaration, we see a bit of a gold bug’s skepticism shining through. Profitability investors need to consider the balance between potential profit and the operational hurdles and current market drivers investors are up against.
Investors faced with decisions such as Barrick Gold versus index fund alternatives such as the XAU or HUI should weigh these realities closely. While Barrick Gold’s stock price offers a glimpse into the company’s current performance, the broader index funds reflect a more collective success among mining companies. The decision between investing in individual mining stocks or diversified index funds hinges on an investor’s risk tolerance and market outlook.