Barrick Gold (GOLD) Gains After Berkshire Discloses Stake

Berkshire Hathaway's $600 million stake in Barrick sends miners higher

Barrick Gold Corporation (GOLD) shares rose more than 10% to retest highs made earlier this year after Berkshire Hathaway Inc. (BRK.A) disclosed a stake worth about $600 million. The move came as a surprise to many investors given that Warren Buffett once called gold a static asset that produces nothing and "merely looks back at you."

Key Takeaways

  • Berkshire Hathaway acquired a surprise $600 million stake in Barrick Gold.
  • Gold prices recently broke through $2,000 per ounce amid the COVID-19 pandemic.
  • Berkshire's move provided a boost to many other gold miners, which are retesting highs.

The gold mining investment was likely driven by Berkshire Hathaway's other portfolio managers – Ted Weschler or Todd Combs – that oversee about $15 billion in assets. That said, Barrick Gold is one of the largest gold miners, producing an alternative asset that's in high demand during the COVID-19 pandemic.

Chart showing the share price performance of Barrick Gold Corporation (GOLD)
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From a technical standpoint, Barrick Gold stock moved sharply higher to retest prior highs of 30.69. The relative strength index (RSI) moved toward overbought conditions, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. These indicators suggest that the stock could see a breakout before a period of consolidation.

Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.

Traders should watch for a breakout from prior highs toward trendline resistance at about $31.00 over the coming sessions. If the stock fails to break out, traders could see a move toward trendline support and the 50-day moving average near $26.94. Of course, much of the price action will depend on the price of gold over the coming months.

The move comes as gold prices continue to trend higher. After briefly surpassing $2,000 per ounce, prices fell below $1,920 before mounting a recovery over the past few sessions.

Chart showing the price performance of gold
TradingView.com

The uptick in the consumer price index between June and July was the largest since the 1990s, but most experts caution that it's hardly a sign of out-of-control inflation. Rather, many investors are turning to gold as a hedge against potential downside as the rift between equity valuations and the underlying economy continues to widen.

Berkshire Hathaway also trimmed its stake in banks like JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC) as well as airlines during the second quarter.

The Bottom Line

Barrick Gold shares moved sharply higher after Berkshire Hathaway disclosed a position worth about $600 million. However, it's unlikely that Warren Buffett was the driving force behind the decision. That said, gold prices have been on the rise amid ongoing uncertainty as investors seek safe-haven assets.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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