Despite the dramatic and surprising rally in the equities sector, many investors still feel uneasy about the growing disconnect between Wall Street and Main Street. Typically, during times of upheaval or uncertainty, concerned individuals have sought the protection of gold and other precious metals. However, physical gold ownership isn’t necessarily convenient. For a mixture of upside potential and contextual stability, you may wish to consider Barrick Gold Corporation (NYSE: GOLD).
Last month, Barrick announced its preliminary results for the 2020 fiscal year, producing 4.8 million ounces of gold, right in the middle of guidance, which called for 4.6 million to 5 million ounces. In addition, the mining firm produced 457 million pounds of copper, a tally that fell within the guided range — between 440 to 500 million pounds.
How to Buy GOLD Stock
If you want to know how to buy stocks right now, shares of Barrick Gold Corporation have arguably never been more relevant and urgent. For one thing, though the yellow metal hasn’t enjoyed the most brilliant start to the new year, gold’s spot price is currently above $1,800, reflecting significant demand.
Just as critically, many questions surround the Biden administration’s ability to navigate both the U.S. pandemic response as well as the disrupted economy. More than likely, the federal government must deliver an unprecedented magnitude of fiscal and monetary stimulus. Such measures create an inflationary effect, which will be very positive for GOLD stock’s underlying asset.
First, you need to follow a few steps.
- Pick a brokerage.
While the mining industry has been around for ages, this doesn’t mean that your method of buying and selling equities must also be antiquated. Thanks to advanced technologies in digitalization, you have multiple options in terms of online brokerages.
When you want to tap into the best brokers, keep in mind that what works for you may not be ideal for others. For instance, virtually all online brokerages advertise commission-free trading. However, not every platform offers comprehensive education materials.
You may prefer an always-accessible customer service interface or have the ability to consult with a financial advisor. In these cases, the convenience of mobile trading apps may not be worth the myriad services that traditional brokerages facilitate.
Only you can decide which platform best suits your needs. See a list of your possible choices here: - Decide how many shares you want.
Though the learning curve required to initiate your first stock order is shallow, you must first familiarize yourself with basic concepts. Above all, market transactions occur via the number of shares you wish to purchase (or sell), not the dollar amount.
To make the conversion from dollars to shares for a stock acquisition, simply divide the dollar amount you wish to purchase divided by the market price of the target stock. For instance, if you want to buy $1,000 of GOLD stock at its current market price of $22.33, you will be able to purchase 44 whole shares ($1,000 / $22.33 = 44.78).
Some brokerages allow you to purchase fractional shares, which means you may be able to purchase $1,000 worth of GOLD stock as opposed to $982.52 worth (44 x $22.33 = $982.52). However, since this is not a standardized feature, not every brokerage facilitates fractional share ownership - Choose your order type.
Because a stock usually fluctuates in value inside a market session, you can’t just buy shares at a set price. Instead, you have different order types, which along with basic investing terminology are explained below.
Bid: The bid is the highest price a buyer will pay for a stock and is always lower than the ask.
Ask: In contrast, the ask is the minimum price a seller will accept and is always higher than the bid.
Spread: The spread is the difference between the bid and ask price. You make money off speculation or the belief that the target stock will rise in value. Market makers make their money by the difference of their stock acquisition price and the price they sell the stock to you.
Limit order: A limit order is a specific price in which you wish to buy or sell a stock. The transaction will only go through under your set price, which is a transparency advantage. However, the downside is that there is no guarantee the stock will hit this price.
Market order: A market order is a request to buy or sell a stock at the next available price. If you place a market order inside normal session hours, it will execute. On the flip side, your buy order will occur at the ask price (and your sell order on the bid price), making such requests less favorable to you.
Stop-loss order: If you believe that your target stock will fall in value, you can set a specific price to exit out of your holdings. This way, you get something out of your investment instead of losing money. However, if the stock price gaps down between sessions, you may end up selling your holdings at a far lower price than desired.
Stop-limit order: This may prevent the nasty surprises that gap-down session can incur on stop-loss orders. Rather than selling outright when a stock falls below a specified price, a stop-limit order will only execute at the specified price and never below it. If a mini rally occurs following a steep gap-down session, a stop-limit order may trigger if the recovery rally reaches your price threshold. Of course, the drawback is that the stock might never reach your specified price, making the stop-loss order the favorable choice. - Execute your trade.
To buy GOLD stock at the most favorable rate, use a limit order. It will execute at the price you want and give you maximum transparency.
However, the risk is that if the session is moving quickly, you may want to place a market order. You won’t receive the most favorable pricing but this guarantees that you will acquire shares as the order is placed within normal session hours.
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GOLD Stock History
During the precious metals rally that started in the early 2000s and ended in 2011, GOLD stock hitched onto a wild ride which saw shares rise from the low teens to nearly a $45 average in the first quarter of 2011. But from then until 2015, GOLD plummeted as the bubble in the metals complex burst.
However, GOLD stock appears to have hit a bottom in Q3 2015. Though the subsequent upswing hasn’t always been clean, recent concerns about economic stability may drive shares into another big rally.
Pros to Buying GOLD Stock
Very few investments historically perform well during periods of uncertainty than precious metals. Check out these other pros:
- Advantage the fear trade: You may be able to ride up a potential gold rally.
- Convenience factor: Though you can buy physical precious metals, this process is both inconvenient and poses theft dangers. You can gain exposure to gold prices while enjoying the administrative peace of mind of stock ownership with a mining firm investment.
- Interest rate incentive: The real interest rate — the benchmark rate backing out inflation — is actually negative. This strange circumstance penalizes holding cash, which may drive demand for inflation-friendly mining stocks like Barrick Gold.
Cons to Buying GOLD Stock
On the flip side, you might want to steer clear of mining stocks for other reasons:
- Volatility risk: Generally, mining stocks have a reputation for volatility. While major gold firms like Barrick are more stable than junior miners, you don’t want to ignore this risk.
- Possibly toying with irrelevance: The rise of alternative safe havens like cryptocurrencies could make gold-based investments less relevant than they used to be.
- History not guaranteed to repeat: While it’s tempting to dive into the safety of gold amid uncertainty, this historical safe haven performance isn’t guaranteed to repeat in the future.
Consider Adding Precious Metals to Your Portfolio
Multiple metrics suggest the fear trade will boost precious metal prices. Most recently, the Labor Department revealed that the economy created only 49,000 jobs in January, with few coming from the private sector. The number of permanent job losers also remains worryingly elevated, at 3.5 million.
Finally, the benchmark interest rate, while rising higher from last year’s bottom, is still down near record lows. This is inflationary, especially for precious metals-based investments, which bodes very well for GOLD stock.
Investors are turning to precious metals for safety. However, GOLD stock provides exposure to this market while offering the convenience of online trading.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.