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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (59019)	9/27/2000 3:15:06 PM
From: Alex	Read Replies (2) \| Respond to of 116762

Going for the Gold Metal With Barrick By Bob Beaty Canada Columnist 09/27/2000 2:03 PM Gold is dead. Long live gold. Aside from the Olympics, nobody likes gold, nobody wants gold. For the first six months of 2000, demand, while strong, was flat against last year's record first-half consumption of 1,600 metric tons. Coin sales, primarily in the US post-Y2K, were down 22%. Well, a couple of years ago when oil was US$10 a barrel, those stocks traded by appointment, too. Is the same in store for gold? Perhaps, but likely not to the same extent. But you have to have a peek at Barrick Gold (ABX: NYSE) in any case. You just never know. The strength of the US dollar has supplanted gold as the safe haven port for nervous investors and institutions. So far, that has been a good strategy. For the last several years, gold has idled between about US$260 and US$290 an ounce, while anyone who converted to US dollars is solidly onside should they wish to convert back to their home currency. Is that about to reverse? Malleable Properties There seems to be little to stop the US dollar, but contrarians may want to begin nibbling away at beaten-up senior gold producers such as Barrick. The shares have dropped 30% since the fourth quarter of 1999 to a current price of US$15. Over that quarter and the first quarter of 2000, investors engaged in wholesale selling of Barrick shares. The other factor is central bank selling. We're a year into a two- to three-year program of European central banks selling gold reserves. When these sales first started, they had a palpable impact on the market. But now that gold has corrected, the sales have had less of a bearing. It's still a weight on the market but the risk is more quantifiable. So this, coupled with a real or perceived weakening of the greenback, could mean a very nice pop in bullion. Historically, a contrarian purchase of senior gold shares tends to outperform a subsequent bullion move. Barrick is the proxy here for those who wish to position for such an eventuality. First Call consensus earnings for Barrick derived from 26 brokers for fiscal 2000 and 2001 is US$0.82 per share. For 1999 the number was US$0.83 per share. At the current price of US$15, that projects a price/earnings ratio of 18. First Call/Thomson Financial broker consensus rates the shares a "buy." Don't Rush With Gold Readers will recall we looked at Barrick in April 1999 at US$17 as a purchase and were sellers when the shares peaked at US$24 in September 1999. We began looking at the shares again in the first quarter of 2000. While the pop has not yet materialized, a purchase at these levels will likely see a solid return on gold shares when bullion's fortunes turn, as they did in the third quarter of 1999. Apparently, it's taking a bit longer this time. If one believes that the US dollar is overbought and gold is oversold, patience will be rewarded, at least with a nice trade on the reversal. The hardest trade to make is one you don't want to do. Such is the case with gold shares. The reality of trading gold shares is that they move before bullion does. Rising gold prices also tend to be seductive and patient investors tend to hold on too long -- hoping that they're on their way to US$1,000 an ounce. Kraft dinners will be a gourmet meal before gold hits that level. The only sure thing about gold investment is: by the time a gold share purchase looks rational, the majority of the profit is already in the share price. worldlyinvestor.com