Gold is the universal safe haven in tough economic times. In the past, when the price of gold was used as the underlying commodity to value paper currency, an increase in the price of gold was a precursor to inflation. Today, the price of gold is a reflection of the fear in the global economy and the barometer by which we measure its present and future health. Base metals and components for finished metals follow the price of gold. However, the price of base metals is more based in practical application such as supply and demand for the metals used in various industries and applications.
Today I will look at Freeport-McMoRan (FCX) and Barrick Gold (ABX). Freeport and Barrick are among the 10 largest mining companies in the world, in the company of Anglo American (AAUKY. PK), BHP Billiton (BHP) and Newmont Mining (NEM). Freeport is the world’s largest producer of molybdenum and the world’s lowest cost producer of copper. Barrick produces 33% of the world’s gold as well as producing copper. Barrick is the lowest cost producer of gold among the top ten
Both companies produce metals that are reliant on economic health – or lack thereof, and in the case of the base metals, growth. Despite the prolonged recovery process in the U.S., the slowdown of growth in emerging market, the eurozone crisis and the high price of gold neither company’s stock has been able to achieve a share price that is reflective of the underlying value of the commodities produced. To continue reading, click here.