I sold ABX yesterday after the large rise in gold prices. I’m the first to admit that I don’t really understand in this day and age what drives gold prices. I originally bought ABX because fundamentally it appeared to be good value and it provided some diversification in my portfolio. Historically gold has always been viewed as a safe haven, a place to park your money during times of uncertainty with the US dollar and during times of political and economic instability. I decided to sell because personally, I don’t think we are in a less stable environment than we were a month ago and I get a little worried when any commodity rises rapidly during a short time period. Additionally, the price move appeared to be driven primarily by funds and investors and not by demand for the physical commodity. This means the price of gold could fall whenever the funds and investors decide to take profits.
Investing in gold stocks is certainly not part of my core strategy of dividend growth. However, whether it’s justified or not investors still flock to gold for safety and then pile out of it when they perceive it’s safe again. I may have sold to early (which is a common theme of mine)... but I guess time will tell. If ABX slides back to the low 30’s I’ll certainly start taking another look at it.