Barrick Gold Stock Rallies With Commodity Cycle Strength

Key Points

• After reporting solid earnings for the second quarter, Barrick Gold stock looks to make a new 52-week high.
• Gold has been at the top of people's minds lately for nations and investors, and Goldman analysts expect higher prices ahead. 
• Buybacks, no short selling, and institutional buying all act as tailwinds to raise this stock's prices.

Global skepticism about the U.S. dollar is rising, and last week’s S&P 500 brief sell-off proves this new trend. It was sparked by Japan’s sudden interest rate hike, which triggered a so-called “carry trade” unwind. This unwind affected currency valuations and preferences, which could then lead to an equally significant rotation in the stock market. While this may create uncertainty in one asset class, it also increases upside in another, such as commodities.

If confidence in the U.S. dollar wanes, commodities priced in dollars, such as oil and gold, are likely to see price increases. So far, investors can have confirmation of this trend from Warren Buffett and his recent buying of up to 29% of Occidental Petroleum Co. NYSE: OXY as a bullish bet for oil prices moving forward. Extending on Buffett’s view, investors could look to gold as another dollar-quoted precious metal that could also see higher prices.

Analysts at Goldman Sachs see oil reaching as high as $100 a barrel this year, and the same sentiment goes for gold prices, as they expect to see the precious metal at $2,700 an ounce for the year. These are only some of the trends that have helped gold prices rally. The initial result was a 6.4% rally in shares of Barrick Gold Corp. NYSE: GOLD after the company reported its second quarter 2024 earnings results.

Barrick Gold Stock Rises on Strong Financial Results and Earnings Boost

The trend is far from over. At least, that's what Barrick Gold's second quarter 2024 earnings results suggest. Posting a revenue boost of up to 12% over the past 12 months leads the momentum for the rest of the announcement. The one metric investors tend to focus on is surprise enough to rally the stock.

Net earnings, which drive investor returns as they are the 'take home' capital, grew to $370 million and posted a net growth rate of 25% over the past 12 months.

Considering that the price of gold might stay on the rise for the coming quarter, current Wall Street analyst forecasts for 31.9% earnings per share (EPS) growth in the next 12 months might be conservative. Management could also agree with this view.

Guidance for the year's second half includes a higher production rate and lower costs, which is the textbook definition of higher expected profits. Solidifying this bullish expectation from insiders themselves, a new share buyback program of up to $1 billion in value represents roughly 3% of the company's market capitalization.

For investors looking to tap into the future demand for gold and its rising prices, the company's free cash flow (operating cash flows minus capital expenditures) is more important. Barrick Gold's positive free cash flow of $340 million positions it to keep making more buybacks and enables management to reinvest into further growth projects.

Rising Gold Enthusiasm Powers Up Barrick Stock

Some nations have taken this basic materials bet to heart. Countries like China, Turkey, and India have been stockpiling their gold reserves lately in preparation for the potential rally that could overtake the precious metal. Whether this affected Wall Street’s view or not doesn’t change the fact that analysts are bullish on Barrick Gold.

Not only are EPS forecasts bullish for the company, but analysts at CIBC also stood out from the pack when they placed a $27 share price target on Barrick Gold stock. The company would need to rally by as much as 44.3% from where it trades today to prove these analysts right, even accounting for the recent earnings rally.

Compared to other peers inside the SPDR Gold Shares ETF NYSEARCA: GLD, stocks like Newmont Co. NYSE: NEM only have a forecast for 22.1% EPS growth and a net upside of 4.8% through a consensus $50-a-share price target; Barrick Gold takes the spotlight in this case.

Now that the stock trades at 94% of its 52-week high, financial and price momentum favor this company. Realizing that the odds are stacking up for bullish traders, bears decided to leave Barrick Gold stock alone, as judged by the 0.8% short interest now reported for the company.

Noticing—and looking to chase—this momentum, institutional buyers like CIBC Asset Management boosted their stake in Barrick Gold stock by 3.3% as of August 2024. This recent allocation would bring the institution’s net investment up to $242.5 million today, another vote of confidence in the gold miner.