Will Barrick Gold Stock Glitter After Dropping 25% In Six Months?

by Trefis Team
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Barrick Gold stock (NYSE: GOLD) dropped 25% in the last 6 months and currently trades at $21. The decline in stock price was mainly driven by weakness in gold prices. After registering a sharp rise from $1,500/ounce in January 2020 to over $2,000/ounce in September 2020, gold prices have since then remained volatile and have, in fact, largely declined. Weakness in the gold price was driven by gradual lifting of lockdowns, which led to expectations of faster economic recovery. Additionally, the successful rollout of a vaccine has led to overall positive sentiment in the market, in turn affecting prices of precious metals. The price of gold currently stands at $1,727/ounce, marking a decline of 14% since its September 2020 high. The recent drop in gold prices took a toll on Barrick Gold’s stock, as the company gets 94% of its revenue from the yellow metal. But will Barrick Gold’s stock continue its downward trajectory over the coming weeks, or is a recovery in the stock more likely?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for GOLD stock average close to 10% in the next three-month (63 trading days) period after experiencing a 25% drop over the previous three-month (63 trading days) period. Notably, though, the stock is likely to outperform the S&P500 over the next three months, with an expected return which would be 7.4% higher compared to the S&P500.

But how would these numbers change if you are interested in holding GOLD stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test GOLD stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF GOLD stock moved by -5% over five trading days, THEN over the next 21 trading days, GOLD stock moves an average of 1.3 percent, which implies a return which is similar to that of the S&P500.

More importantly, there is 51% probability of a positive return over the next 21 trading days and 46% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of GOLD Stock Movements:

Question 1: Is the average return for Barrick Gold stock higher after a drop?

Answer:

Consider two situations,

Case 1: Barrick Gold stock drops by -5% or more in a week

Case 2: Barrick Gold stock rises by 5% or more in a week

Is the average return for Barrick Gold stock higher over the subsequent month after Case 1 or Case 2?

GOLD stock fares better after Case 2, with an average return of 1.3% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.5% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Barrick Gold stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Barrick Gold stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For GOLD stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although GOLD stock appears to be an exception to this general observation.

GOLD’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Barrick Gold stock by changing the inputs in the charts above.

While GOLD stock may have moved, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Compass Minerals vs Southwest Gas shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

 

See all Trefis Price Estimates and Download Trefis Data here

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