Goldman Sachs Raises Gold Forecast by 10% and Adds Barrick (ABX) to Conviction Buy List
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(Updated - June 27, 2016 8:30 AM EDT)
Following the UK's vote to leave the EU, Goldman Sachs lifted its view of Precious Metals to Attractive from Neutral and boosted its gold forecast by an average of 10% for 2017 and 2018. The bank's gold price deck for '16/17/18 was raised to $1,260/$1,261/ $1,250 (from $1,202/$1,150/$1,150).
Goldman Sachs also added Barrick Gold (NYSE: ABX) to its Conviction Buy with a price target of $27.00 (prior $23.00), implying upside of 32%. Newmont Mining's (NYSE: NEM) price target was raised to $47 (from $36).
"The UK’s vote to leave the EU caused a flight to safety and lowered US 10-year treasury yields to 1.57% from 1.74%, driving gold prices up c.5% on 6/24. Our economics team still thinks the FOMC will raise rates in 2016 but probably not before December. Meanwhile, our commodities team believes the ultimate trajectory of gold will depend on the intensity and duration of the uncertainty shock created by the leave outcome and any potential revisions to the US growth outlook," said analyst Andrew Quail.
"Given our more constructive view on gold prices we add ABX to the Conviction List. It is the largest gold company globally by both market capitalization and production. We believe it is well positioned to outperform as gold price fundamentals stabilize and the self-help idiosyncratic story continues to gain momentum," continued the analyst.
Quail added, "On our revised gold price deck, we now expect ABX to generate over $1bn in FCF over the next 12 months, enabling it to further delever by a full turn on net debt/EBITDA. As outlined in our June 8, 2016 report “Revisiting the bull case, rerating story remains on track; reiterate Buy”, we continue to see potential positive catalysts over the next year. Lastly, while we acknowledge the strong YTD performance (+177%) we highlight that despite its strong self-help story and low cost asset base ABX continues to trade at a c.20% discount to the global peer group."
Shares of Barrick Gold closed at $20.47 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst PT Change, Hot Comments, Hot Upgrades, Upgrades
Related EntitiesGoldman Sachs Conviction Buy List, Goldman Sachs, Federal Open Market Committee
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