Barrick Gold Corp. (NYSE: ABX)
Barrick Gold has been having a great time in the market throughout the year, for the most part. More recently, the stock has been falling. Nonetheless, I see the recent declines in the stock as an opportunity. Today, we’ll talk about why I believe that ABX will climb from here.
Understanding What Causes Movement In ABX
Before we get into what I’m expecting to see from Barrick Gold, it’s important that you understand what traditionally causes movement in the stock. The company has proven itself as a strong company that knows how to capitalize on opportunities. However, as the name would suggest, the company is focused on the production of gold. As a result, the stock is very exposed to spot market prices. As a result, of this strong relationship with gold, any movement we see in the price of commodity will likely lead to the exact same type of movement in ABX.
Oil News Signals Global Economic Struggles Ahead
One of the most recent factors contributing to my bullish opinions surrounding ABX actually have to do with oil. Recent news shows major concerns in the oil market. First and foremost, on Monday, OPEC released a report showing that it expects for non-OPEC production to rise by 180,000 barrels per day in the year 2017. On top of that, the IEA released data saying that it expects for demand to come in at 800,000 barrels per day in the third quarter. That figure is down 1.5 million barrels per day year over year. With massive declines in demand and increases in supply, things aren’t looking good for oil.
While it may seem like this has nothing to do with Barrick Gold, that couldn’t be further from the case. At the end of the day, oil is a very important commodity around the world. In fact, most developed countries have a striking dependence on the commodity. As oil continues back toward crisis mode, economic pressure will likely be added to developed nations. Because gold is a safe haven investment, this will likely lead to increased demand, leading to gains in the value of the precious metal and therefore, ABX.
India Wedding Season
Another major factor that’s likely to lead to increased demand is the Indian wedding season. At the end of the day, India is one of the world’s largest consumers of gold. In weddings, gold is a key component in the culture. With the Indian wedding season just around the corner, we’re likely to see increased demand, leading to further gains in the value of gold.
Economic Conditions Suggest Further Gains
At the end of the day, gold is a safe haven investment. In fact, that’s why the precious metal gained in the beginning of the year as the result of global economic concerns. While economic conditions are starting to improve, they are far from perfect. In fact, in some areas, the global economy is declining. Just take a look at what we’re seeing with regard to inflation in China, inaction by the European Central Bank, and US jobs growth. At the end of the day, the global economy isn’t out of the woods just yet. Further safe haven demand growth should help gold continue to gain in value, leading to gains in ABX.
What Do You Think?
Where do you think ABX is headed and why? Join the discussion in the comments below!