Barrick Gold Stock Suffers From Rising Yields. Should You Invest Now?

Barrick Gold Stock

Barrick Gold Stock (NYSE:GOLD)

Barrick Gold stock has fallen around 21% this year, in line with the S&P 500, as the gold prices have fallen. The gold market is the critical driver of Barrick’s stock price, accounting for more than 90% of the company’s revenue. At its current price of over $1,670 per ounce, gold seems to be an unpopular investment option, having dropped by nearly 7% year to date and by around 16% from recent highs observed in March. Central banks worldwide have been increasing interest rates to combat rising inflation. As a result, the value of safe-haven assets like the U.S. dollar and government rates have increased, putting downward pressure on the price of commodities like gold. U.S. 10-year government bond yields, a widely used indicator of borrowing costs, recently hit 3.5%, the highest level in almost a decade. Increases in energy costs and disruptions in the supply chain are also putting a strain on Barrick’s cost base.

Despite this, we believe there is merit in considering Barrick stock despite its recent fall. Following a steep decline from the 2020s over 24x levels, the company is now trading at approximately 12x consensus 2022 profits. Given the bleak global economic picture and rising macro uncertainty, gold prices may look higher in the medium future. The GDP in the United States has shrunk for two consecutive quarters, and consumer confidence has been low throughout this time. Concerns have also been raised that Russia, whose military has suffered significant losses this month, may decide to step up its fight against Ukraine. These developments may increase demand for gold, which would benefit Barrick Gold Corporation’s (NYSE:GOLD) bottom line. Barrick is the largest gold producer in the world. Given that it has been delivering its balance sheet in recent years, Barrick stock looks to be in an excellent position to weather a prospective recession and the rising rate environment. With debt paid off, the corporation had a net cash position of over $600 million at the end of the second quarter.

Barrick Gold Corporation’s (NYSE:GOLD) decision to expand its copper operations may boost the value of the company’s shares. The company’s revenues are less than 10% of Barrick’s total, but they’re expanding quickly. The business said it was on pace to exceed its annual copper production guideline ranges of 420-470 million lbs as output increased by 25% year over year to 120 million lbs in Q2 2022. Copper demand is expected to increase over the long term as the global economy transitions from hydrocarbons to alternatives like renewable energy and electric cars, both of which rely heavily on copper. Since copper frequently co-occurs with gold in large-scale deposits, Barrick gold stock is expected to have an advantage over other miners in the copper market. Despite a year-over-year fall in copper prices, the company’s robust copper output led to Q2 2022 results that were somewhat greater than predicted, with earnings per share of $0.27, up from $0.23 the year before.

At $21, our price target for Barrick Gold stock is 40% higher than the current market price. Read our report on the worth of Barrick Gold stock for more information. For a deeper dive into the company’s top revenue drivers and how they’ve been trending, see our study of Barrick Gold Corporation’s (NYSE:GOLD) financials.

Featured Image – Megapixl ©  Daddiomanottawa

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.