barrons.com
“Against the latest macro data, we are now increasing our gold price forecast by an average 7% for 2019 and 2020,” wrote Deutsche Bank analyst Chris Terry. If economic growth keeps slowing, the Federal Reserve would be less likely to raise interest rates, and could even have to lower them.
Terry’s new gold-price forecast is $1,350 a troy ounce by the end of the year, 3% higher than current levels.
Along with boosting his commodity forecast, Terry also raised his rating on shares of Barrick. The move was based, in part, on the higher price forecast, but opportunities to cut costs, save money via synergies, and divest assets also make him more positive on the stock.
Don’t forget. Barrick recently struck a deal with Newmont Mining (NEM) to pool certain assets. That should drive down costs and improve earnings for both producers.
Looking ahead: Gold miners have been stuck in neutral lately. The VanEck Gold ETF has lost investors about 1% a year, on average, for the last five years. That poor performance has left the sector trading at about 2.7 times sales, a 15% discount to the historical average.
Higher gold prices could be the catalyst needed to get gold stocks, such as Barrick, trading back in line with historical averages. |
