The Street.com posted an interesting story this past Thursday about the winners and losers of the day. While consumer stocks and commodities continue to lead the indices in gains (per expectation of many investors), the most interesting subtext was the story told by two particular stocks, Alcoa and Barrick Gold Corp. With the hype surrounding the gold market these days, seeing the stock drop from its one-year high of near $48 on December 2 to $41 on December 10 seems troublesome. Alcoa, on the other hand, looks strong after apparently striking an energy supplies deal with the Italian government—although after hours, the story changed.
BARRICK’S TUMBLE. A sharp drop in gold prices since earlier this month has investors concerned over gold stocks, at least in the short term. However, Barrick’s troubles may continue to mount. It was reported on December 4 that Barrick’s new Cortez Hills gold mine in Nevada may be temporarily halted for environmental testing. As the U.S. dollar continued to ride the data suggest consumer confidence this holiday season, Barrick continued its tumble. Meanwhile, the World Gold Council announced on Thursday the appointment of a new chairman, Ian Telfer, to replace Greg Wilkins, Barrick’s vice president. As the Credit Suisse Group pulled ahead, Barrick’s fell an additional 0.7 on Thursday.
ALCOA’S GAINS. One of Thursday’s biggest winners was Alcoa, which enjoyed a healthy jump following an up-and-down week. While it has yet in December to match last month’s highs, Alcoa showed 3% gain on the news that the Italian government had struck a deal with the company. The deal on energy supplies, touted by the Italian government, would have certainly affected last month’s decision to temporarily close two aluminum smelters in Italy due to concerns about competitive rates looking forward. Interestingly, by day’s end Alcoa had denied the report from the Italian government, explaining that forward motion had been made in talks but no formal agreement was set. After hours, Alcoa continued to gain.
ASSESSMENT. It is far too early to determine what will become of gold prices, and trying to decide on the basis of consumer confidence leading into the holidays is futile. The best bet for investors is to stay the course on gold until the market shows clearer signs of a strengthening dollar or consistently falling gold prices. Barrick’s tumble seems more to do with the company than with gold itself. Alcoa’s gains, on the other hand, are baffling in that the company began looking up in a pretty substantial way a day before any announcement was made. It may well be that Alcoa is gaining back some of the strength it displayed last month—the stock has peaked once or twice a month since August (excepting a smaller bump last month) and, bullish minds might suggest, could push back toward its mid-September highs.
