Bounce may get stretched after 5%-10% gain from here
The stock seems to be gaining a little strength. Yesterday's move was based on good volumes and it seems that there may be a few good days. However, Barrick Gold is up around 22% from its low of $17.51 made less than a month ago, and hence this bounce may start to get stretched after additional 5-10%. The last leg of the fall started from around $30, and the stock is still far away from that. With Gold prices doing better, it seems that there is a very strong direct correlation between the two. The recent high was $55, and even that had a correlation to high gold prices in September 2011. Despite the rise, Barrick Gold is trading at a discount to book value (P/B 0.88). Thankfully, the recent lows held, and the stock was saved from a much deeper correction which could have taken it to $15-16. Thus, the recent correction is over (for the time being) and the recent lows are highly likely to hold in case of another dip. Not a time to load the cart, but if one has entered around the recent lows then one can continue to hold with a stop loss and sell after a few percentages. The current gloom has had a very negative impact on the entire sector with several good quality gold stocks trading at very low valuations. Development stage companies (e.g. Pershing Gold (PGLC) which is expected to start production in 2014) are trading at extremely attractive valuations. Though the current valuations may appear okay, the worry on future outlook is what is keeping the gold stocks down. Several analysts are bearish on the segment. For Barrick, the high debt on books ($14.80 billion) is another matter of concern. The cash on books on March 31 was $2.34 billion and the D/E ratio is nearly 60.