How Barrick Gold Is Placed after Gold’s Rally

As the gold rally has eased a bit this week, gold mining stocks have also taken a break. Barrick Gold (NYSE:ABX) and Newmont Goldcorp (NYSE:NEM), the two top gold mining company stocks, have moderately positive correlations with gold prices. Since December, these stocks have exhibited decent uptrends until recently.

However, as US-Iran tensions have calmed, investors have moved away from gold as a safe haven. Spot gold prices have fallen from their level of $1,611 per ounce earlier in the week to $1,558 per ounce today. This drop has pulled down mining stocks as well.

Barrick Gold’s earnings

Barrick Gold said it would produce 5.1 million–5.6 million ounces of gold in 2019. It’s set to release its numbers for the fourth quarter of 2019 sometime in the middle of February. For 2019, the company will report EPS of $0.52 based on analysts’ estimates. This figure represents an increase of almost 50% compared to 2018. In comparison, Newmont Goldcorp is expected to report EPS of $1.30, a decrease of almost 3% year-over-year, based on estimates.

Technical indicators

Barrick Gold stock is currently trading close to the oversold zone with an RSI (relative strength index) of 34. Considering its simple moving average levels, the stock looks strong. It’s trading 2% and 9% above its 50-day and 200-day moving averages, respectively. Its 50-day moving average of around $17.3 could act as an immediate support level for it in the short term. If the stock breaks below this level, its 200-day moving average of around $16.7 could be the next support level for the stock.

Newmont Goldcorp stock is trading 4% and 11% above its 50-day and 200-day moving averages, respectively. Its 50-day moving average of around $40 could act as a support level for it in the short term.

Let’s take a look at the valuations of these two stocks. Barrick Gold stock is trading at 24x its estimated earnings for the next 12 months. Its historical average valuation is also close to these levels. Peer Newmont Goldcorp is trading a little higher at 22x its forecast 2020 earnings. To dig a little deeper into the valuations of these two players, read How Do Barrick Gold and Newmont Goldcorp Stack Up?

Analysts’ price targets

Wall Street analysts largely look positive on Barrick Gold stock. Deutsche Bank increased its target price from $20 to $21 on January 9. Among the total 21 analysts tracking Barrick Gold stock, nine recommend “buys,” eight recommend “holds”, and four recommend “strong buys.” No analysts recommend “sells” on the company as of January 10. Analysts’ mean target price for Barrick Gold is $20.5, which suggests an estimated upside of 17% for the next 12 months.

Deutsche Bank also increased Newmont’s price target from $46 to $48 yesterday. It has a mean target price of $47.6 against its current market price of $41.7, implying a potential upside of 14.4% for 2020. Of the 18 analysts tracking NEM, nine recommend “buys,” four recommend “strong buys,” and five recommend “holds.” None recommend “sells.”

Higher gold prices (NYSEARCA:GLD) last year buoyed gold miners’ earnings. The same trend could continue this year if the bullion again achieves upward momentum. The pullback in gold this week could be momentary, and volatile broader markets could again push investors toward the traditional safe haven.

Gold mining stocks have fared well recently amid the rally in precious metals. But how are silver stocks are placed as of late? Read Are Silver Mining Stocks Attractive amid a Bullion Rally? to find out.