Here’s Why We’ve Lowered Our Price Estimate For Barrick Gold To $19

November 2nd, 2016 by Trefis Team

Gold prices dipped considerably in October, with London PM Fix gold prices averaging roughly 5% lower last month as compared to the average for Q3. [1] Rising expectations of an interest rate hike by the Fed in December have driven down prices of the yellow metal. [2] The investment demand for gold, which is viewed as a safe-haven asset, is extremely sensitive to changes in interest rates. Since investment in gold only yields capital gains, rising interest rates tend to shift investors away from gold towards interest-linked securities. Moreover, improving economic conditions also draw investors away from gold towards other asset classes such as equities.

With the Fed widely expected to raise interest rates in December, gold prices are unlikely to regain levels seen in Q3 for the rest of the year. A relatively subdued gold pricing environment going forward has prompted us to review our pricing forecasts for Barrick Gold. The following graph illustrates our new forecasts for Barrick Gold’s realized gold prices.

We have also suitably modified our margin forecasts for the company’s gold mining divisions. As a result of the changes to our forecasts, our new price estimate for Barrick Gold is a better reflection of the prevailing gold pricing environment.

Have more questions about Barrick Gold? See the links below.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Barrick Gold

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Notes:
  1. Historical Gold Prices, Kitco [↩]
  2. Fed expected to tee up December interest-rate hike, Market Watch [↩]