Fool's Gold Report: Gold Prices Fall Again, But Will Barrick's New Pay Policy Change the Industry?

Gold continued to drop Tuesday, calling 2014's rally into question. Will precious metals recover?

Apr 1, 2014 at 7:04PM
Longview

Coming into Tuesday, investors had hoped that gold prices would take the opportunity to add to their gains from the first quarter, despite a more recent downturn that has sent gold more than $100 down from its recent highs. Yet gold started the second quarter on a down note, leading to declines for SPDR Gold Shares (NYSEMKT:GLD) even as Market Vectors Gold Miners (NYSEMKT:GDX) and most mining stocks inched higher. Some of the most interesting news came from Barrick Gold (NYSE:ABX), which announced a new compensation policy that it claims could revolutionize the industry.

How metals moved today
June gold futures dropped $3.80 per ounce to $1,280, which resulted in a 0.2% drop for SPDR Gold Shares. Daily share volume for SPDR Gold Shares was well below average levels, suggesting a lack of trading interest in the yellow metal that likely added to the malaise in gold prices. May silver fell more than $0.06 per ounce to $19.69, but platinum and palladium prices gained on the day.

Metal

Today's Spot Price and Change From Previous Day

Gold

$1,280, down $5

Silver

$19.76, unchanged

Platinum

$1,418, up $5

Palladium

$776, up $2

Source: Kitco. As of market close.

Gold And Silver

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

In the run-up to earnings season for the bulk of the stock market, gold investors are left trading on economic data, and lately, readings on the recovery have been reasonably strong. Without any impetus for the Federal Reserve to change its general direction on monetary policy, ETFs like SPDR Gold Trust will have a tough time bouncing back from their recent setbacks, and gold prices will struggle to regain levels from earlier in 2014.

For investors in mining stocks, though, it's becoming clear that efforts to keep costs in line are just as important as changes in bullion prices, if not more so. Barrick's new initiative to redefine its executive compensation practices comes in the aftermath of years of problematic relations between shareholders and executives. One key component of the new policy involves paying executives with convertible units based on a scorecard of various factors, including return on invested capital, dividends, and free cash flow. Controversially, the converted shares aren't eligible for sale until an executive retires or leaves the company. Some investors worry that the restrictions will give talented executives an incentive to quit early in order to reap the rewards of their performance, but others argue that vesting requirements should provide enough penalties to stay the course.

Whether Barrick's initiative is effective depends largely on how valuable the incentives its executives earn turn out to be. If the stock can't rebound, then all the equity-linked incentives in the world won't provide stronger performance. By contrast, awarding incentives at a time when the industry arguably can only go up is also dangerous in its own way. It'll be interesting to see how shareholders respond in the long run to Barrick's moves.

More broadly, though, mining-stock investors need to keep executive compensation and other costs in check in order to preserve cash and expand margins. Otherwise, the tough pricing environment for bullion could sink earnings and create further losses for shareholders.

3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers