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In a market dancing in bear market territory and with elevated inflation, it certainly doesn't hurt to own a defensive stock or two. And one that fits the bill, with an inflation hedge as a bonus, is Barrick Gold (NYSE: ABX).

Barrick Gold is the world's number one gold producer, with a 2007 production capacity of 8.1 million ounces, and 124.6 million ounces in proved/probable reserves. Analysts see a 20-30% revenue gain in 2008 for ABX, following a solid performance in 2007, due to a higher average gold price and increased production.

What's behind the gold bull market? Three factors: 1) increased use of gold in industrial and commercial applications, 2) rising demand for gold jewelry, and 3) increased reliance on gold and gold shares as an alternative investment. All three trends show only modest signs of abating in 2008. Asia-based jewelry demand looks especially promising in the immediate years ahead. The Reuters F2008/F2009 EPS consensus estimates for ABX are $2.43/$2.60.

The risks? Obviously, an end to the bull market in gold would hurt Barrick's results. Analysts are also keeping an eye on ABX's skilled labor costs.

Stock Analysis: Barrick Gold is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from ABX's shares. Stop Loss if you were to purchase shares in this company: $28.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

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ABX hasn't been below $37.50 since September and has shown support around $40 recently. This trade could be risky if the price of gold futures relaxes in the coming months, but even if that happens, this position could be protected by the support the stock has formed between $38 and $40 over the past two months.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ABX.

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With gold trading down sharply from its highs, Keith-Fitzerald offers a special report on gold stocks in Money Morning, highlighting three companies that he consider to be the "very best of the best."

"Gold remains a key profit opportunity -- especially if inflation, or even stagflation, is taking hold. It should also help that economic uncertainty is escalating. However, since the economic outlook has grown more uncertain, we've decided to our recommended list down to just three picks:

"The StreetTracks Gold Trust (NYSE: GLD) is an ETF that tracks the price of gold directly, making it the simplest way to invest in the yellow metal via an ETF. And with a market cap approaching $17 billion, this fund has ample liquidity.

"Barrick Gold Corp. (NYSE: ABX) is a Toronto-based company with mostly North American production, as well as properties in South America and Africa, and some copper and zinc add-ons. It has a $38 billion market capitalization, so there's plenty of liquidity.

"It has a trailing P/E of 19.27 and a forward p/e of 15.11. By gold-mining standards, this company has a substantial presence, is reasonably valued, and has little political risk. The company also recently sent some very bullish signals to the market and reasserted its confidence in meeting its 2008 output target of up to 8.1 million ounces of gold.

"One other key point: As big backers of income-producing stocks, we liked Barrick's announcement that it was boosting its June dividend by 33%.

"Yamana Gold (NYSE: AUY) is another U.S.-listed/Canada-based company, but this one does its mining in Brazil, Argentina, Chile, Honduras and Nicaragua. It has a market cap of $9.7 billion and a trailing P/E of 39.17, but its forward P/E is only 13.91.

"Despite its geographic reach, it faces only a medium geopolitical risk. Expect the company to double production to 2.2 million ounces per year by 2012, primarily in Brazil and Argentina."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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MOST NOTEWORTHY:

• CIBC upgraded Barrick Gold (NYSE: ABX) to Sector Outperformer from Sector Performer based on stronger 2H08 production.
  
• RBC Capital upgraded Bank of Nova Scotia (NYSE: BNS) to Sector Perform from Underperform citing expectations for benign credit deterioration near-term, retail momentum, and asset growth in international banking.
  
• Morgan Keegan upgraded Wal-Mart (NYSE: WMT) to Outperform from Market Perform based on improving productivity and earnings outlook.

• Rangold Resources (NASDAQ: GOLD) was upgraded at HSBC to Overweight from Neutral.
  
• Goldman raised ORIX Corp (NYSE: IX) to Neutral from Sell.
  
• Liquidity Services (NASDAQ: LQDT) was upgraded at Pacific Crest to Sector Perform from Underperform.

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After hitting a one-year low of $27.71 in May, the stock hit a one-year high of $54.74 in March, ABX opened this morning at $44.77. So far today the stock has hit a low of $44.75 and a high of $46.20. As of 12:40, ABX is trading at $45.63, up $2.16 (4.9%). The chart for ABX looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $37.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just one month as long as ABX is above $37.50 at May expiration. Barrick would have to fall by more than 18% before we would start to lose money. Learn more about this type of trade here.

ABX hasn't been below $37.50 since September and has shown support around $42 recently. This trade could be risky if the price of gold futures declines over the coming month, but even if that happens, this position could be protected by the support the stock might find from its 200-day moving average, which is currently around $41 and rising.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ABX.

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"The recent decline in gold from above $1,000 is prompting gold bears to say that the great gold bull market has reversed itself," says Martin Hutchinson who states, "Let me say right now: They're wrong."

In his Money Map Reporter, he explains, "Thanks to three key catalysts, we may well see gold at $1,500 an ounce this year, if not higher." Here's his outlook and a trio of ways to play this trend.

"These three catalysts - worldwide monetary policy, global supply-and-demand for gold, and gold's past performance - have already ignited a powerful rally that's virtually certain to carry gold to much higher price points, despite the breather the rally appears to be taking right now.

"Don't be fooled. Every rally needs a catalyst - something that ignites and then fuels the bullish trend. As noted above, gold has three. Let's take a look at each of them:

1. Monetary policy: More than for any other investment, gold's price depends primarily on the world's monetary policy. When monetary policy is loose, as it was in the 1970s, gold prices soar. When it is tight, as in the 1980s, prices decline sharply.

"U.S. monetary policy has been loose since 1995, and particularly since the recession of 2001 and 2002, and other countries have followed the US' lead. Since the subprime crisis exploded onto the scene last September, the Fed has been lowering interest rates.

"Gold has sold off in the past couple of weeks as the market has focused on the U.S. recession, believing that inflation pressures will decline, but that's wrong. Monetary expansion continues and even is intensifying, meaning that inflationary pressures will increase and gold will be the beneficiary.

2. Global Supply and Demand: For most commodities, price rises have an effect on supply and demand; a higher price increases supply and reduces demand, in 'price elasticity.' Gold appears to be an exception. For gold, rising prices appear to increase demand and decrease supply.

"While real global interest rates remain low, gold should retain its current dynamics, with speculative demand increasing as prices rise. Since the pools available for speculative investment are much larger today than they were in 1980, the predicted gold price 'spike' could even move well beyond 1980's peak price of $2,250 an ounce (as measured in today's dollars).

3. Comparison with past peaks: If gold had increased in price since 1997 by the same percentage as world dollar reserves, it would currently be trading at around $1,280 per ounce. The 1980 gold price peak of $875 per ounce intraday is equivalent to more than $2,200 per ounce when inflation is taken into account.

"At some point, with monetary policy as loose as it is currently, inflation will probably accelerate to a point that will force the world's central bank policymakers to take action. When that happens, interest rates will have to be sharply increased. Then - and only then - will the risk-reward potential for gold change enough that wise investors should sell.

"Remember that recessions don't stop gold prices from rising. Gold's first major peak was in the middle of the 1974 recession and its second was well into the first part of the 1980 recession.

"As inflation accelerates, it will probably take a few months for clear inflationary signals to cause the Fed to reverse its policies and attack inflation. And during that period, expect speculative demand for gold to intensify and its price to increase steeply.

"The longer the period before the Fed is forced to increase interest rates, the higher gold will go. We do not believe that target price of $1,500 is too aggressive. It seems very probable that with speculative demand tending to increase, gold could reach that latter level before the end of 2008.

"The bottom line: Until the Fed reverses monetary policy and increases interest rates, gold is one of the best investment bets in an uncertain world.

"The simplest way to play gold is through the StreetTracks Gold ETF (NYSE: GLD), which with $19.8 billion outstanding has ample liquidity, and tracks the gold price directly. Alternatively, you should consider buying gold mining shares.

"Barrick Gold Corp. (NYSE: ABX) is a Toronto-based company with mostly North American production, as well as some South America and Africa properties, and some copper and zinc add-ons. It has a $38 billion market capitalization, so there's plenty of liquidity.

"It has a trailing Price/Earnings ratio (on the most recent 12 months) of 34, but a forward P/E (on the next 12 months) of 16. By gold-mining standards, this company has a substantial presence, is reasonably valued and has little political risk.

"And, the company also recently sent some very bullish signals to the market and then this week said it was confident that it could meet its 2008 output target of up to 8.1 million ounces of gold.

"Yamana Gold (NYSE: AUY) is another U.S.-listed Canada-based company, but this one does its mining in Brazil, Argentina, Chile, Honduras and Nicaragua. It has a market cap of $9.7 billion and a trailing P/E of 40, but its forward P/E is only 14.

"Despite its geographic reach, it faces only a medium geopolitical risk. Expect the company to double production to 2.2 million ounces per year by 2012, primarily in Brazil and Argentina."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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Technician Yola Edwards had forecast a rise in gold to $1032; it rose to $1034, before correcting. In her Edwards Charts she offers a technical outlook for gold, Goldcorp (NYSE: GG) and Barrick Gold (NYSE: ABX).

"Gold exceeded my $1032.50 level by posting an intraday high just shy of $1034 but it turned on a dime and plunged over a US$100. The daily chart now indicates prices are oversold according to the MACD and RSI as the price bounces off support at the lower Bollinger band.

"However, a negative bias remains. A corrective wave four will retrace to the top of wave 1 at about US$865 if the decline holds true to theory, which should be viewed as a buying opportunity as the fifth advancing wave should see gold rally to about $1145 over the next four months.

"Goldcorp has traced out a 'U' shaped bottom over the past two years and is now in a consolidation phase. Since pulling back from its high two weeks ago the month ended with a type of spinning top which halted the previous decline.

"A recent weekly candlestick is beginning on the negative side but is exhibiting a long shadow which shows that the bears case is waning somewhat. The consolidation is within an uptrend but with the weekly and daily charts somewhat mixed a sideways consolidation between $38 and $42 may materialize before another attempt at new highs.

"A close below $37.21 would see the stock dip further to about $35, however a close above $45 would signal a potential breakout with a target of about $66.60 over the ensuing six months. Add to positions now and on dips to $35.

"Barrick Gold was pummelled along with gold bullion prices, but has found support from its November '07 breakout. Its technical action would suggest lower prices and thus a retest of the recent lows at $42.50 would not be a surprise.

"However a close below $42.77 would suggest additional pressure with a downside target of $40.90. If the stock dips back to retest the lows and is able to bounce off of them then a double bottom would be in place and a rally should materialize from there.

"A close above $46.38 could be the beginning of a retest of the recent highs over the next month. Buy at $42.77 with a stop at $41.78."

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• DJIA 12,099.66 (-293.00; -2.36%)
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• NASDAQ 2,209.96 (-58.30; -2.57%)
• 10YR-TBond 3.362% (-0.089)

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In her Edwards Charts, technical expert Yola Edwards reviews the outlook for gold, as well as her latest new buy recommendation, Barrick Gold (NYSE: ABX).

"Gold rallied faster than anticipated reaching my suggested lower target price of US$978.50 on February 29. The daily candlestick ended in a doji star and it could be setting up an evening star pattern suggesting lower prices ahead if gold cannot close above US$978.50. H

"However, there is a good possibility that the level will be exceeded as both the daily and weekly MACD are on buy signals. Additionally we have two long white advancing candles and a third if formed the first week of March would form a three advancing white soldiers pattern signifying strength ahead and i would then look for a rally to about US $1032.50.

"On the negative side though you find the RSI at overbought levels and the possibility of an evening star pattern thus I would expect a pullback to about US$950 first before higher numbers. In any event it would offer another buying opportunity.

"Meanwhile, Barrick Gold appears to have traced out a pennant pattern over the past three months and may be close to breaking out of the formation to the upside.

"Over the past two months the stock's consolidation has depressed the MACD to extremely oversold levels suggesting that a buy signal given from this level may see the stock soar to the upside very quickly. The pattern's technical measurement suggests a target of $67.64 over the next two months. Buy."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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After hitting a one-year low of $26.94 last March, the stock has risen steadily all year to hit a one-year high of $54.00 in January. ABX opened this morning at $51.98. So far today the stock has hit a low of $51.61 and a high of $53.39. As of 12:55, ABX is trading at $53.10, up 1.92 (3.8%). The chart for ABX looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $42.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just one and a half months as long as ABX is above $42.50 at April expiration. Barrick would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.

ABX hasn't been below $42.50 since December and has shown support around $51 recently. This trade could be risky if the price of gold relaxes after its recent run-up, but even if that happens, this position could be protected by the support the stock might find at its 50-day moving average, which is around $48 and rising.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ABX.

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Barrick Gold (NYSE: ABX) closed at $53.55 Monday.

Gold is recently up 0.30% to $987.20 according to Bloomberg.

ABX option implied volatility of 42 is near its 26-week average near according to Track Data, suggesting non-directional risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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• Arcelor Mittal (NYSE: MT) was upgraded by Deutsche Securities from Holdto Buy. MT shares are up 3.75% in premarket trading.
• Imclone (NASDAQ: IMCL) was upgraded at Cowen & Co from Neutralto Outperform.
• Barrick Gold (NYSE: ABX) was downgraded by UBS from Buyto Neutral , and the target price lowered from $55 to $56
• Gilead Sciences (NASDAQ: GILD) was downgraded by Bernstein from Outperformto Mkt Perform

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After hitting a one-year low of $26.94 in March, the stock hit a one-year high of $54.00 last month. ABX opened this morning at $49.23. So far today the stock has hit a low of $48.89 and a high of $49.55. As of 11:15, ABX is trading at $48.93, up $1.20 (2.5%). The chart for ABX looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $37.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just two and a half months as long as ABX is above $37.50 at April expiration. Barrick would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.

ABX hasn't been below $37.50 by more than a few cents since September and has shown support around $49 recently. This trade could be risky if the price of gold drops off sharply, that probably won't happen with inflation worries continuing as interest rates keep getting lowered.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ABX.

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Barrick Gold Corporation (NYSE: ABX) acquires, explores and develops mining properties. Products include gold, copper, silver and zinc. The firm is the top producer of gold in the world, taking eight million ounces annually from nearly thirty mines in North America, South America, Australia-Pacific and Africa. It has proven and probable mineral reserves of over 120 million ounces of gold, 6 billion pounds of copper and 964 million ounces of silver. Major competitors include Newmont Mining (NYSE: NEM) and Rio Tinto (NYSE: RTP).

The stock popped over the past week, as analysts predicted further upside in the price of gold. They anticipated that the prospect of more Federal Reserve rate cuts will continue to weigh on the dollar and expected that more investors will turn to gold as a hedge against inflation. The shares have begun to consolidate the gain in a bullish "pennant" pattern. Equities frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys," five "buys," twelve "holds" and one "underperform." Analysts expect a 34% growth rate, through the next year. The ABX Price to Book ratio (2.81), Operating Margin (18.51%) and Net Profit Margin (12.53%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 71% of the outstanding shares. Over the past 52 weeks, the stock has traded between $26.94 and $49.33. On Friday, it closed at $47.93. Should you decide to invest, allow morning volatility to pass and consider a stop-loss of $41.50.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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As Michael Fowlkes discussed yesterday, gold prices have been rising strongly over the past few days as fears about a possible recession increased and the U.S. dollar continues to weaken. Gold for February delivery rose in the previous session $9.10 to end at $869.10 an ounce on the New York Mercantile Exchange. There have been a handful of notable names that have benefited from these news to trade up to new highs.

Gold has been strong lately, and gold stocks have been following gold's lead. Gold had a very strong day yesterday, with prices breaking through a new record for the second straight day. Josh Bridges, analyst at JP Morgan, anticipates the new year would be a strong one for gold as "it must be remembered that gold is typically a late-stage performer."

• Streettrack Gold Trust (NYSE: GLD) - set a new 52-week high yesterday of $85.94;
  
• Barrick Gold Corp. (NYSE: ABX) - traded up to new 52-week high yesterday of $49.33;
  
• Agnico Eagle Mines Ltd. (NYSE: AEM) - set a new 52-week high yesterday of $59.45;
  
• Goldcorp Inc. (NYSE: GG) - set a new 52-week high yesterday of $38.55.

As the market continues to deal with mounting economic concerns and oil prices continue to gain ground do not be surprised to see gold continue to move higher into next week.

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What's driving the gold bull market? Three factors: increased use of gold in industrial and commercial applications, impressive jewelry demand, and increased reliance on gold and gold shares as an alternative investment. All three trends are global in scope and show little signs of abating in 2008. Asia-based jewelry demand looks especially promising in the immediate years ahead. The Reuters F2007/F2008 EPS consensus estimates for ABX are $1.51/$2.17.

The risks? Obviously, an end to the cyclical bull market in gold would hurt Barrick's results substantially. In particular, a cyclical downtrend in inflation would make some who buy gold as an inflation hedge to reconsider their purchase; but developed world inflation trends do not suggest that inflation is moderating.

Stock Analysis: Barrick Gold is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from ABX's shares. Consider a stop loss of $23.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

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