Recent Attention Started With Buffett’s Bet On Gold Stocks; What’s Next?
Have you heard the news about gold stocks? Apparently billionaire Warren Buffett’s Berkshire Hathaway took a position in Barrick Gold (GOLD Stock Report) earlier this month. Berkshire’s stake in the Toronto-based Barrick Gold comes despite both Buffett and his right-hand man Charlie Munger over the years repeatedly voicing their disdain for gold. Munger has even said “civilized people don’t buy” gold.
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However, even in light of this, Berkshire took up a position. Buffett’s team didn’t disclose the reason for its investment. But reports cite that i’s possible the decision was made by Todd Combs or Ted Weschler, investment managers who are potential successors at Berkshire. No matter the case, it has certainly put a smile on the faces of Barrick’s leadership as well as its investors. CEO Mark Bristow thinks the investment Berkshire is a “significant step” for Barrick and the industry.
He told FOX Business that, “It’s the ultimate privilege to have Berkshire Hathaway as an investor in one’s company and something that I’ve been aspiring to…We hope it’s not the end.”
Since the announcement, shares of Barrick Gold stock reached a new 2020 and 52-week high. Shares scrambled to highs of $30.27 on Monday and continued swiftly higher on Tuesday to reach $31.22. This is the highest Barrick Gold stock has traded since February of 2013. Barrick’s all-time high still sits at just a hair shy of $56, which was set back in September of 2011.
But Are All Billionaires Bullish On Gold Stocks?
Despite this recently bullish sentiment, the market continues to post some additional risks for gold prices this week. In fact, since the precious metal reached a new all-time high of $2,089.20 on August 7th, gold prices have declined around 7%.
We’ve also seen Treasury Yields try to re-establish themselves, which hasn’t helped gold stocks this week. However, the bullish sentiment in the stock market hasn’t completely subsided either. Many of the top firms on Wall Street have gone a step further, placing a warning on gold prices and volatility after the multi-month breakout we saw.
Mark Mobius, founder of Mobius Capital Partners, is the latest fund manager to voice his concern regarding the price action in gold. “The safest investments are equities and precious metals such as gold. However, I would not advise buying gold or precious metals at this time until a price correction has taken place,” he said in an article. As a staunch supporter of gold, Mobius typically supports physical gold. But in the same article he actually supported the idea of looking at companies “with strong balance sheets and growing earnings.”
Bank of America has also released the results of an August Fund Manager Survey. These show that the gold market is the second-most crowded asset in financial markets, only behind tech stocks. The report noted that of the total survey participants, 31% said that gold prices were overextended. This is the highest reading since 2011.
Are Gold Stocks On Ice For Now?
Despite the mixed messages from the likes of analysts and others like Berkshire, I don’t think gold or even mining stocks, in general, are “on ice” right now. If you look at the stock market today, you’ll clearly see several gold stocks bouncing on Thursday. In addition to Barrick gold stock, other sector stocks have started to go into the green.
B2Gold (BTG Stock Report) bounced off of its 50-Day Moving Average on Thursday. The gold stock was slowly sliding since it briefly rallied late last week. After falling from its 52-week high of $7.55, BTG stock reached an interim low of $6.40 before bouncing back to an interim high of $7.34. But after that, BTG continued lower. On August 20th, shares tested the 50 DMA around $6.17, then rebounded by the afternoon session (so far).
Yamana Gold stock (AUY Stock Report) hasn’t pulled all the way back to that major technical level. But the company’s shares have considerably pulled back from 52-week highs as well.
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Right now, $7.02 is the mark set earlier this month but since then, Yamana Gold stock dipped to $5.77. On Thursday, the gold stock evaded a continued slide as the AUY bounced back from under $6 to highs of $6.17 during the morning session. So, should you buy gold stocks right now or wait for more of a correction? Leave us a comment in the section below with your thoughts.
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