Barrel gold Stocks (TSX: ABX) (NYSE: GOLD) have been in the niche lately, with stocks plunging in conjunction with the price of gold.

Without a doubt, the popularity of cryptocurrencies, known by some as millennial gold, has severely reduced the demand for precious metals. While Bitcoin, Dogecoin, and the like can exhibit characteristics of alternative assets like gold, I would say given their limited history, it’s a bad idea to replace even a fraction of your gold exposure with one. extremely volatile speculative asset that could pull back at any time.

In addition, few alternative investments compare to gold with regard to low degrees of correlation. While cryptocurrencies tend to trade in their own world when stock markets are normal, it should be noted that Bitcoin and the larger basket of digital tokens tend to join stocks when fear really hits the heart. investors.

Bitcoin falls short of the gold standard

Gold, however, tends to hold up much better than most other low correlated assets in times of crisis. At the end of the day, it’s not just a low correlation with the stock markets that matters, but how it behaves when the going gets really tough. In the latest panic, the 2020 stock market crash in response to the coronavirus, Bitcoin traded like stocks – riskier stocks, in fact.

What good is the low correlation of an asset if it is canceled at the most important time?

While Bitcoin and the like might trade less like stocks during the next market crash, I certainly wouldn’t bet on that. I would say cryptocurrencies are more likely to amplify the downside in the next big pullback. As such, I believe crypto is not a suitable alternative to gold. Gold stocks and physical bullion are the gold standard, when it comes to low correlation inflation hedges.

Barrick Gold shines

With Barrick Gold stock down 34% from its all-time highs in 2020, I see a significant opportunity for long-term investors. Not only are gold prices a catalyst in a plummeting cryptocurrency market, but I think many investors are underestimating Barrick’s distinct operational advantages that could allow it to maintain a bountiful dividend.

The story continues

The company not only owns and operates world-class gold mines, but the tailwinds seem to be directed towards its back. In inflationary environments, like the one we find ourselves in now, gold tends to outperform. While the Fed has removed concerns about inflation, noting that it is likely transient in nature, one needs to prepare for a scenario in which the Fed is wrong and inflation is here to stay.

At the end of the line

There is no doubt that inflation of 5% or more is a high impact event, but low probability. Either way, investors need to be prepared. At today’s depressed levels, I think Barrick gold is the ultimate hedge that most investors lacking exposure to precious metals should be looking to buy amid its recent weakness.

Plus, the dividend, which pays 1.7%, makes Barrick a more productive way to play an otherwise unproductive asset. While the payout isn’t mind-blowing, it is far more generous than cash or bonds in this type of environment. The main attraction of gold or gold stocks is the low correlation with the stock markets. The dividend, I think, is a great bonus.

The Barrick Gold Stock Is a Screaming Buy Amid Higher Inflation post first appeared on The Motley Fool Canada.

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Foolish contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

2021