Why We’re Lowering Our Price Estimate For Barrick Gold To $16
Gold prices have been negatively impacted by strengthening expectations of a Fed interest rate hike over the past few weeks. These expectations have been corroborated by statements made by the Federal Reserve chairwoman last week to Congress, who said that an interest rate hike “could well become appropriate relatively soon.” [1] A seventy-third consecutive month of job gains has culminated into the unemployment rate dipping below 5% in October, as per the latest jobs report released earlier this month. [2] Moreover, expectations of strengthening economic growth have also contributed to the decline in gold prices, particularly in the wake of the U.S. presidential election.
President-elect Trump’s pro-business campaign promises such as lessening the regulatory burden on businesses, lowering corporate tax rates, and a $550 billion infrastructure development plan have boosted expectations of economic growth going forward, as evidenced by the sharp rally in the stock markets since the election. [3] Improving economic conditions tend to lower the safe-haven investment demand for precious metals such as gold. In addition, since gold as an investment only offers capital gains, rising interest rates tend to shift investors towards other securities that offer returns linked to interest rates. With recent developments negatively impacting the gold pricing environment, we have revised our forecasts for gold prices. The following graph illustrates our latest expectations for gold prices, which represents a 5% decline in prices by the end of our forecast period as compared to our previous forecast.
In addition to modifying our gold pricing forecast, we have also revised our margin forecasts downward along with the changes to the pricing forecast. These have translated into our new price estimate for the company.
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Have more questions about Barrick Gold? See the links below.
- What Is Barrick Gold’s Revenue And EBITDA Breakdown?
- What Is Barrick Gold’s Fundamental Value Based On 2015 Results?
- By What Percentage Did Barrick Gold’s Revenue & EBITDA Decline In The Last 2 Years?
- How Has Barrick Gold’s Revenue Composition Changed Over The Last 2 Years?
- How Will Barrick Gold’s Revenue Composition Change by 2020?
- Barrick Gold: A Look Back At The Year 2015
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