Potential Upside Scenario for Barrick Gold

Barrick Gold Corporation (NYSE:ABX) is the world’s largest pure gold mining company and is headquartered in Toronto, Ontario. Being primarily a gold mining company, it derives close to 80% of its revenues from the sale of gold. Our projections put the averaged realized gold price for the company at $1,557 per ounce in 2011.

Below we look at potential upside to our $59 stock price estimate for Barrick Gold.

13% Upside – $67 Trefis Price Estimate for Barrick Gold

Average Realized Price for Gold

Gold prices have typically trended well with rising inflation. The massive monetary easing that occurred during the financial crisis of 2008/2009 is expected to spur inflation down the road. This has encouraged central banks to add to their gold reserves as a means to avoid currency devaluation. Gold and other commodity prices declined sharply in the past few months. This decline in the prices was short-lived and the price for gold is now around $1,540 per ounce.

Gold hit a record high of $875 an ounce on Nymex in January 1980. This price, when adjusted for inflation, comes out to around $2,318 per ounce for the present market. While gold may not reach this figure any time soon, there is a strong demand for gold at current prices, which could push the spot market prices further up to $1,800 levels. This means that Barrick Gold could achieve a $1,700 average realized price for an ounce of gold, lifting revenues and profits, and lending a 13% upside to our $59 stock price estimate for Barrick Gold. The primary drivers for gold during the year might be the weakening of the Euro and U.S. Dollar.

See our full analysis and $59 price estimate for Barrick Gold here