Barrick Gold Corporation (USA) (ABX), Goldcorp Inc. (USA) (GG) & Gold: Poor Performance Was Expected

Even if both Goldcorp and Barrick trade around their 52-week lows, Goldcorp is not undervalued versus its peers. Hence, if gold falls, Goldcorp should behave the same way. Meanwhile, Barrick, given its lower valuation, is more protected against a further fall of the commodity. To give you a valuation idea, Goldcorp trades at 1.25x price to NAV, while Barrick trades at 1.15x. Goldcorp Inc. (USA) (NYSE:GG) also trades at 2013 14.7x operating cash flow while Barrick Gold Corporation (USA) (NYSE:ABX) trades at the seemingly lower multiple of 10x. If you hold Barrick you might want to keep it in the portfolio while you sell other more expensive companies such as Goldcorp or even GLD.

Gold has lowered its price by 25% during the last six months, but this fall could be even harder. Gold is not oil or soy or even sugar. There are no clear fundamentals sustaining gold prices at current levels but its safe heaven status. My recommendation is clear: sell the metal unless you hold it through a deeply undervalued company such as Barrick Gold Corporation (USA) (NYSE:ABX).

The article Gold: Poor Performance Was Expected originally appeared on Fool.com and is written by Federico Zaldua.

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