Late in the evening of November 11, The Daily Telegraph reported that Barrick Gold (ABX) has shut its hedge book because the world gold supply is running out. Barrick Gold's president, Aaron Regent, told the periodical that global output has been shrinking at a pace for nearly 1 million ounces a year since the start of the decade.

At RBC's annual gold conference in London, Regent noted that "There is a strong case to be made that we are already at 'peak gold.'" Regent believes that production peaked around 2000 and has dropped ever since, he adds that Barrick Gold believes the decline will continue because "It is increasingly difficult to find ore."

When gold miners and gun-toters lag the broader economy, it's usually a good sign that conditions are on the mend. Both sectors outperform when times were tough, but this year, their growth has slowed relative to the market has a whole.

The S&P 500 index has gained 57% since March 9, 2009, according to a USA Today report, while Barrick Gold (NYSE: ABX) and Newmont Mining (NYSE: NEM) are up 36% and 21%, respectively, for the same period. Smith & Wesson (NASDAQ: SWHC) is up 30%. Again, these are definitely respectable results, but they aren't keeping pace with the index.

Barrick Gold Corp. (NYSE: ABX) announced that it would begin eliminating its hedges against a collapse in gold prices.

In so doing, the company is raising some $3 billion with the sale of stock that will dilute current shareholders.

While the gold hedges may have acted as a brake on revenues and profits in a rising gold price environment, the strategy was prudent.

Gold at $1,000. Better buy now or you will miss the greatest invention since tulips in the 1800s.

Or so they say. I say, what a bunch of baloney. Why on earth would I want to put hard-earned cash on something that may look pretty but has no real tangible value?

That's right, gold has no tangible value. Well, that's not entirely true since there is a vast cult of worshipers out there that say gold is the only thing with value. As a result of their die-hard belief, gold actually does have value, as we now see with AU trading for $1,000 per ounce.

Barrick Gold (NYSE: ABX) closed at $37.18. Gold is recently up 1.43% to $977 according to Bloomberg. ABX June option implied volatility is at 45, July is at 47; below its 26-week average of 66, according to Track Data, suggesting decreasing price movement.

Melco Crown Entertainment (NYSE: MPEL) closed at $6.06. MPEL's City of Dreams in Cotai, Macau, is scheduled to open on June 1. MPEL June option implied volatility is at 91, October is at 95; near its 26-week average according to Track Data, suggesting non-directional price movement.

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

"As the name suggests, Royal Gold (NASDAQ: RGLD) is a royalty company, one of the larger and longest-established of such companies, with a focus on gold," says resource exprt Adrian Day.

In his Global Analyst advisory, he explains, "In my view, the stock offers a combination of growth, low risk, and high potential." Here's his look at this "golden opportunity."

"In the past year, the company has acquired two significant royalty packages, the first last year from Barrick and more recently from Teck Cominco. The Barrick package includes approximately 70 royalties.

"Even before these acquisitions, it had a solid long-term growth record, in royalties and in revenues. Its pipeline is solid, including a royalty on the large Pensasquito mine of Goldcorp; when that ramps up in 2012, it will add about 25% to Royal's revenues.

One by one, the key indices appear to be breaking their support lines.

The Dow Industrials were the first to break earlier this week and yesterday set a new bear market closing low. Now the S&P 500 has fallen through its support zone at 800-820 and so has the NYSE Composite. Only the Nasdaq is holding above its January low, while the others are in a full test of the November bear market bottoms.

For several days, I've been comparing this week's market action with the week of Nov. 17, when the market broke to new lows and then reversed. We've discussed the closing low of Nov. 20 and the subsequent reversal on Nov. 21, with its new intraday low, the similarity in the volume, the similar stochastic readings and so on.

Gold is trading down $19 today, and pulling several major gold stocks down to new 52 week lows in reaction to the drop in the precious metal.

If you follow gold prices, you know that the past month has not been kind on the commodity, with prices falling from above $900 an ounce a few weeks ago down to its current price of $716.30. Earlier in today's session we actually saw prices trading much lower, breaking through the psychological $700 barrier, and falling all the way down to $695.20 an ounce. This is the first time in 13 months that gold has been under $700, and marks a huge drop from the highs it set back on March 14, when it was at historic highs above $1000 an ounce.

Typically, you would think that recessionary times in America would lead to a rise in gold, but this time around things are a bit different. Not only is America in hard times, but countries all around the world are dealing with their own economic slowdowns, which in turn is pushing currencies around the world lower. As this happens, the dollar, despite the current state of the American economy, has been strengthening against its foreign counterparts. As we all know, gold trades inversely proportionate to the dollar, so any strength in the American currency will result in gold prices dropping, and that is part of what we are seeing right now.

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.

Barrick Gold (NYSE: ABX) shares are trading higher today as gold futures have advanced by almost 2%. Gold is being propped up by yet another record high for crude, which investors expect to drive inflation. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ABX.

After hitting a one-year low of $28.89 in August, the stock hit a one-year high of $54.74 in March. ABX opened this morning at $46.42. So far today the stock has hit a low of $46.00 and a high of $47.00. As of 12:05, ABX is trading at $46.55, up $1.05 (2.3%). The chart for ABX looks neutral and improving, 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 August 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 5.3% return in just seven weeks as long as ABX is above $37.50 at August 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.

Barrick Gold (NYSE: ABX) shares are trading higher today as gold futures are on the move higher. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ABX.

After hitting a one-year low of $27.79 last June, the stock hit a one-year high of $54.74 in March. ABX opened this morning at $41.06. So far today the stock has hit a low of $40.70 and a high of $41.50. As of 12:10, ABX is trading at $40.73, up 0.29 (0.7%). The chart for ABX looks neutral and improving, 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 October bull-put credit spread below the $32.50 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 16.3% return in just four months as long as ABX is above $32.50 at October expiration. Barrick would have to fall by more than 20% before we would start to lose money.

ABX hasn't been below $35 at all since August and has shown support around $38 recently. This trade could be risky if the dollar recovers and gold futures fall, but even if that happens, this position could be protected by the support the stock might find around $37 where it has formed a bottom over the past seven months.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in ABX.

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.

Barrick Gold Corp. (NYSE: ABX) shares are rising today, helped by higher gold futures. Gold futures are not back up to their record $1,000+ prices, but are recovering after a dip down below $900 in late March. The front-month contract is up almost 2% today, nearing $950 possibly due to investor worries about inflation as the dollar continues to struggle against foreign currencies. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ABX.

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.

"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.

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.