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
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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