Gold has closed bullish for three consecutive weeks, leaving an ATH at $2195. As of last week, the yellow metal achieved gains over 4.7%. Increased geopolitical tensions, weak US economic data, increased gold holdings by the central banks, fears over bank run, uncertainties over the upcoming US presidential election (a successful election of Trump may prompt the US to withdraw from NATO, thus posing security risks globally), etc are some of the positive catalysts which kept the yellow metal buoyed. Recent predictions by Citigroup projected the safe-haven asset to hit a record $2300/ounce at 25% probability, and up to $3000 in the next 12 to 16 months.
Central Banks Adding More Gold Reserves. Source: World Gold Council
Another tailwind was when Fed Chair Powell signaled the possibility of interest rate cuts this year, despite the economic outlook remaining uncertain. His remark led to a slip in the Dollar, whilst a rate cut reduces the opportunity cost of holding the yellow metal, resulting in the latter being relatively more attractive compared to interest-bearing assets.
Nevertheless, historically, the average annual return of gold lags far behind stocks and bonds. There is a study which shows that the average annual return of gold exchange-traded funds SPDR Gold Shares and iShares Gold Trust has been near to 4% since 2014, whereas the S&P500 produced around 13%.
A surge in the gold price may benefit Barrick Gold – a Canada-based company founded in 1983 which actively engages in the production and sales of gold and copper, exploration activities and mine development. It has 16 operating sites in 13 countries, owning 5 of the 10 largest gold mines in the world.
In the previous quarter, the company reported higher gold production (1.05 million ounces), bringing its full-year production to 4.05 million ounces. Since 2019, approximately 29 million ounces of attributable proven and probable gold reserves have been added, thanks to the company’s continuing success of its brownfields exploration programs.
Barrick Gold has been fundamentally strong in the industry with almost no net debt. In its latest earnings report, the company reported an increase of 7% (y/y) in operating cash flow, to $3.7B for FY 2023. Its free cash flow has risen 50% (y/y) to $646 million. A solid business performance and continued strength of balance sheet allowed the company to distribute dividends consistently to shareholders, at $0.10 per share in the latest announcement.
Technical Analysis:
#BarrickGold, Daily: The asset last closed bearish below a strong resistance zone $16.05-$16.15 and the 100-day SMA. Throughout the week, the company share price has risen around 5%. The nearest support is seen at $15.60, followed by $14.90 and the session low $13.76. On the contrary, a break above the said resistance zone may encourage the bulls to continue testing $16.70, followed by $17.50.
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Larince Zhang
Market Analyst
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