Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev | Next
Author: TMFTwitty Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 247  
Subject: After the Gold Rush? Date: 11/24/2003 3:29 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
http://www.fool.com/News/mft/2003/mft03112407.htm?ref=btp

After the Gold Rush?

By Motley Fool Staff
November 24, 2003
Gold has been on a tear in recent years, flirting recently with $400 an ounce, a level not seen since 1996. (In 1999, gold prices hit 20-year lows.)

Contributing to a jump this past week was news that Barrick Gold (NYSE: ABX) will no longer engage in hedging. Canada's Barrick is North America's second-largest gold producer, after Newmont Mining (NYSE: NEM), which is numero uno in the world. In the past, Barrick would "hedge" its exposure to changes in the price of gold by selling gold that has yet to be yanked out of a mine today at a predetermined price. Other firms have also cut back on hedging, which has forced purchasers to buy on the "spot market," at current prices.

There's some sense to Barrick's reasoning. In the words of founder and CEO, Peter Munk, since the firm now has plenty of cash (more than $1 billion, to be precise), "Hedging to us is no longer a requirement for running our business as it no longer creates shareholder value. Hedging was a means to overcome cyclicality. Over the next decade, we will do no more hedging."

The company's current hedge book contains orders totaling about 16 million ounces, equal to roughly three years of output.

If you find yourself tempted by the idea of investing in gold, think it through. (Though of course, investing in a gold-producing company is not exactly the same as buying the shiny yellow bricks.) Gold has done well for investors over specific periods, but overall, its record is far from impressive.

From Jeremy Siegel's seminal book, Stocks For the Long Run, here's how a single dollar invested in various vehicles would have fared from 1802 to 2001 (yes, just about 200 years!): stocks, $600,000; bonds, $1,000; bills, $300; gold, $0.98. (These numbers are adjusted for inflation.) Gold's results are not too pretty.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Value Hounds

Medallion Financial: TAXI!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement