This gold stock is down 20% this year in a market where nearly all other stocks have moved higher. Investors are now wondering if this is the right time to add more Barrick Gold (TSX:ABX)(NYSE:GOLD) stock to their portfolios or bail out and look for other opportunities.
Gold trades near US$1,800 per ounce at the time of writing. That’s down 6% on the year and off about 14% from the 2020 high. The market has traded mostly in the US$1,700-1,900 range in 2021, surging or pulling back as traders digest economic data and try to figure out which way gold will go in the coming months.
Gold trades in American dollars, so anytime the greenback falls in value against a basket of other key currencies, gold tends to find support. The dollar index dipped below 90 earlier this year after soaring above 100 in the early part of the pandemic, when money flooded into the U.S. currency.
At the time of writing, the dollar index is at 92.5, up nearly 3% on the year. Things might change in the last few months of 2021, but the plunge in the dollar that many analysts expected this year hasn’t materialized. That could be one reason gold has remained stuck in a US$200 range.
Bond yield movements might be a better gauge of where gold is headed, although the correlation between gold and bonds has been less reliable in recent months.
As the U.S. 10-year yield fell in 2020, gold rallied. Things then reversed course, with the 10-year yield spiking from 0.5% in August last year to 1.75% at the end of March 2021. Gold sold off along the way and then caught a bounce through April and May as the 10-year yield pulled back a bit. However, the summer months saw a disconnect. The 10-year bond yields have continued to drift lower and currently sit near 1.3%. Gold has also dropped from US$1,900 to the current price, instead of moving higher.