Forget Bitcoin: Barrick Gold Stock May Be the Best Hedge for Your Buck

Barrick Gold (TSX:ABX)(NYSE:GOLD) stock may very well be a better hedge than Bitcoin or other cryptocurrencies in an inflationary environment.

| More on:

Barrick Gold (TSX:ABX)(NYSE:GOLD) shares have been under considerable pressure over the past several months, as gold prices slid. Undoubtedly, gold has been quite the volatility asset of late, rallying over 10% between March and June, only to plunge nearly 8% in a matter of weeks.

While there’s not yet enough data to conclude that gold and its miners have a negative correlation with cryptocurrencies like Bitcoin, Dogecoin, Ethereum, and all the sort, I have noted in many prior pieces that the next cryptocurrency crash could bring forth considerable inflows back into lowly correlated alternative assets such as the precious metals — most notably, gold.

Gold investing is tough in the Bitcoin era

There’s no question that it’s frustrating to be a gold investor these days. In an era where people are getting filthy rich off Bitcoin, an asset that some view as a gold alternative. Personally, I think those replacing all of their gold exposure with Bitcoin or any other cryptocurrency will find themselves in tears come the next big major pullback.

In prior pieces, I’ve highlighted Bitcoin’s performance in times of panic was comparable to that of the riskier of equities. While there may be a low degree of correlation when all is well, times are good, and things are pretty normal, such low beta tends to go bye-bye once fear strikes the hearts of investors.

As of right now, I continue to favour top-tier gold miners like Barrick Gold over cryptocurrencies or their miners. Why? Gold has been an inflation-resilient store of wealth for millennia. Digital assets like cryptocurrencies have yet to have time to show they live up to the gold standard. Unfortunately, given their performance in 2020, I fail to see how Bitcoin can be viewed as the “millennial gold.”

Bitcoin and gold are incomparable in my books!

Bitcoin and gold are two very different beasts. While it may make sense to hold both as a part of a diversified portfolio, I’d much rather overweight in gold at today’s juncture. Today, Bitcoin is fresh off a vicious plunge, with a potential head and shoulders top pattern that could bring forth even more pain for cryptocurrency investors. Moreover, China’s crypto crackdown and U.S. Treasury Secretary Janet Yellen’s distaste for the asset do not bode well for its future, at least over the near term.

Gold, while also under some pressure, looks better poised to bounce back into year’s end. And cryptocurrency’s loss, I believe, could be gold’s gain.

Barrick Gold is one of my favourite ways to bet on gold, because of its handsome dividend policy. Warren Buffett has slammed gold numerous times in the past for being an unproductive asset. It doesn’t produce anything, and he’s right in that equities or farms will do better over the extremely long term.

That said, Barrick is, as I’ve previously described, a productive way to play an unproductive asset. The stock’s 1.7% dividend yield is a wonderful bonus that investors have the opportunity to “lock in” amid gold’s latest slump.

Should gold continue its ascent past the US$2,200 mark, Barrick’s dividend is likely to follow suit. So, in addition to the low degree of correlation to the broader markets, investors also stand to get rewarded over time for their patience.

Bottom line

Analysts seem overwhelmingly bullish on Barrick Gold stock right now. The Street-high price target of $42.50 implies north of 66% worth of upside from today’s levels. Should Barrick stock correct upwards in such a fashion, the 1.7% yield dividend may very well compress to and below the 1% mark. As such, those looking for a productive way to play an unproductive but lowly correlated inflation hedge like gold should look to do so while the price of admission is still low.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

A plant grows from coins.
Stocks for Beginners

1 Canadian Stock Ready to Surge In 2025

First Quantum stock is one Canadian stock investors should seriously consider going into 2025, and hold on for life!

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Franco-Nevada Stock: Buy, Sell, or Hold in 2025?

Franco-Nevada's Q3 reveals the power of streaming amidst record gold prices. Its zero debt balance sheet, US$2.3 billion in capital,…

Read more »

coins jump into piggy bank
Dividend Stocks

A 10% Dividend Stock Paying Out Consistent Cash

This 10% dividend stock is one strong option for long-term income, but make sure you get a whole entire picture…

Read more »

analyze data
Metals and Mining Stocks

Why This Magnificent Canadian Stock Just Jumped 13%

This Canadian stock is one of the best options out there, with shares rising, still offering a discount, and more…

Read more »

nugget gold
Metals and Mining Stocks

Better Gold Stock: Barrick Gold vs. Franco-Nevada

Franco-Nevada vs. Barrick Gold: Which gold stock deserves your investment dollars in 2025? I'll compare Q3 results, business models, and…

Read more »

bulb idea thinking
Metals and Mining Stocks

The Smartest Canadian Stock to Buy With $3,500 Right Now

A small investment in this high-growth stock can double or triple in 2025.

Read more »

nugget gold
Metals and Mining Stocks

2 Premium Canadian Gold and Silver CEFs for Your TFSA

Gold and silver ETFs are a fantastic way to expose your portfolio to the precious metals asset class.

Read more »

Tractor spraying a field of wheat
Metals and Mining Stocks

Nutrien Stock: Buy, Hold, or Sell in 2025?

Choosing the right time to let go of a stock can be just as crucial for your returns as identifying…

Read more »