Barrick Gold Shines as Miners Rebound

NEW YORK (TheStreet) -- With an unexpected drop in consumer confidence the price of gold and silver continues to move higher. Gold for April delivery at the Comex division of the New York Mercantile Exchange moved above the $1,343 level, while Barrick Gold (ABX), one of the world's leading producers of precious metals, rallied for most of Tuesday's session.

Barrick Gold is up 19.6% for the year to date, as of Tuesday's close of $21.08, compared with the Standard & Poor's 500, down 0.2% for the similar period. The company holds interests in mines in North America, South America and Australia Pacific as well as copper mines located in Chile and Zambia and a mine under construction in oil-rich Saudi Arabia.

Last year was especially brutal for all the gold miners as the price of the shiny metal plunged to lows not seen in several years.

As the one-year chart below illustrates, what goes down often rebounds, and shares of Barrick are off to a positive start in 2014. I've included the exponential moving averages (EMA) of the share price for a technical perspective.

ABX Chart
ABX
data by YCharts

After falling off the proverbial cliff last March shares have stayed above the 50-day EMA (red line) since the start of 2014 and recently broke above the 100-day EMA line in the past week. From a technical perspective that's an important breakout.

It doesn't mean Barrick's share price may not retest both EMA stock price support levels, but if it does and holds above them both, that often signals a trend in motion and a fortuitous time to begin accumulating shares of ABX.

On Feb. 13 the company reported a fourth-quarter 2013 net loss of $2.83 billion ($2.61 per share), including after-tax impairment charges of $2.82 billion. Adjusted net earnings were $0.41 billion (37 cents per share). Operating cash flow was $1.02 billion and adjusted operating cash flow was $1.09 billion, the company reported.


For the full year 2013, Barrick reported a staggering net loss of $10.37 billion ($10.14 per share), including after-tax impairment charges of $11.54 billion. Despite the losses it was able to boast of adjusted net earnings of $2.57 billion ($2.51 per share).

Barrick's operating cash flow of $4.24 billion and adjusted operating cash flow of $4.36 billion reflect the underlying strength of the company's high-quality mining operations. This is part of the reason why RBC Capital Markets upgraded the company to outperform from sector perform.

Right now expectations for Barrick are modest, with the highest one-year price target among analysts currently standing at around $28, according to Yahoo! Finance.

If investors have another chance to buy shares of ABX at close to $20, it would then offer a dividend yield of 1%. If the price of gold holds steady or keeps moving higher the possibility of a 20% intermediate term upside gain would certainly be reasonable.

For investors who prefer diversity and less risk, the Market Vectors Goldminers ETF (GDX) offers a good selection of gold producers. Barrick Gold represents nearly 15% of the top-10 holdings followed by my personal favorite, Goldcorp (GG), at 13% of the ETF's holdings.

Here's a one-year chart of the Goldminers ETF with the same EMA lines I used in the Barrick chart. It appears this sector has bottomed and has quite a ways to go until this nascent rally is concluded. For those of us who buy into that theory, let's keep our fingers crossed after we've done our own due diligence.

GDX ChartGDX data by YCharts

At the time of publication the author had  positions in ABX, GDX and GG.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

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