With Gold Prices Firming, Is Barrick Gold Stock A Buy?

+6.20%
Upside
18.50
Market
19.65
Trefis
GOLD: Barrick Gold logo
GOLD
Barrick Gold

The shares of Barrick Gold Corporation (NYSE: GOLD) have fared reasonably well over the last month, rising by about 7%, although they remain down by about 9% year-to-date. The recent gains come as the prices for gold – which accounts for over 90% of Barrick’s revenue and remains the primary lever of the stock price – see some gains. Prices for the yellow metal have risen by around 10% since early November, currently trading at about $1,802 per ounce, following softer-than-anticipated U.S. inflation numbers over November and signs that the Federal Reserve will slow down the pace of its rate hikes. The yield on the 10-year treasury bond, which is also considered an alternative safe haven asset – has declined from around 4.2% in early November to about 3.7% currently. Energy prices have also cooled a bit in recent months, which could help lower the company’s gold production costs, helping margins in the medium term.

So is Barrick Gold stock still a buy following the recent rally? Gold prices could see further gains, given the tough global economic outlook and mounting macro uncertainties. The U.S. is widely expected to slip into a recession, while China, too, faces headwinds as Covid-19 cases soar. Russia’s war in Ukraine, which is about to enter its second year, also remains a concern, particularly for European economies. These factors could make gold a bit more appealing, helping price realizations for Barrick, which is one of the world’s largest gold producers. Barrick also appears well positioned to navigate a potential recession and the rising rate environment, given that it has been deleveraging its balance sheet in recent years. Separately, Barrick’s move to scale up its copper business could drive an incremental upside for the stock, given its application in a host of futuristic industries. Although the business accounts for under 10% of Barrick’s overall sales, it is growing fast. Over Q3 2022, copper production rose by a solid 23% year-over-year to 123 million lbs.

We have a $19.50 price estimate for Barrick Gold, which is about 13% ahead of the current market price. See our analysis of Barrick Gold valuation for more details. Also, see our analysis of Barrick Gold Revenues for more details on the company’s key revenue streams and how they have been trending.

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 Returns Dec 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GOLD Return 6% -9% 8%
 S&P 500 Return -6% -20% 71%
 Trefis Multi-Strategy Portfolio -6% -23% 212%

[1] Month-to-date and year-to-date as of 12/23/2022
[2] Cumulative total returns since the end of 2016

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