Commodities Price Trend, Gold and Barrick Gold

At the time of the closing bell for 2022, according to statistics provided by the World Bank, most commodities have been trending higher from 2019 to 2022.

Fig.1: Commodities Price Indices.
Source: World Bank

Among them, annual average price index of fertilizers took the greatest leap especially after the outbreak of the Russian-Ukraine war and the consequential sanctions against Russian gas (an essential element for producing fertilizers), from 81.4 (2019) to 201.8 (last recorded in November 2022), an increase of +147.91%. The runner up was energy (+78.29%), followed by food (+58.05%; grains led the competition in the category at +69.10%). On the other hand, precious metals managed to record gains of +24.57% for the same period.

Fig.2: Gold Price Averages. Source: World Bank

Spot gold last closed at $1823, slightly above the annual averages seen in 2021 ($1800). Compared to 2020 and 2019, the precious metal was up by nearly +3% and +31%, respectively. In 2022, it displayed the best quarterly performance in the 2nd quarter, at $1874. In general, the precious metal remains traded sideways.

There are bullish and bearish views regarding the gold outlook in 2023. Saxo Bank was the most bullish party, predicting Gold to reach $3000 with the reason that “inflation is set to remain ablaze for the foreseeable future”. On the other hand, analysts of Fitch and Trading Economics belong to the bearish side, expecting Gold to hit $1600 by the end of 2023. In short, the development of the gold price largely depends on inflation and the condition of economic growth.

Barrick Gold

Barrick Gold Corporation (#BarrickGold) is a Canada-based company founded in 1983, which actively engages in the production and sales of Gold and Copper, exploration activities and mine development. It has 16 operating sites in 13 countries, owning 5 of the 10 largest gold mines in the world.

Fig.3: Gold Demand by Sector. Source: World Gold Council

Based on the latest publication by Goldhub, YTD gold demand has returned to pre-pandemic levels, boosted by jewellery consumption (+10% y/y) and continuous central bank purchases. In fact, the global central banks have been accumulating their gold reserves at the fastest pace since 1967, ever since the US and its allies froze Russia’s dollar reserves. The flight towards Gold reflects “mistrust, doubt and uncertainty”.

Fig.4: Reported Sales of Barrick Gold versus Analyst Forecast. Source: CNN Business

Sales of Barrick Gold remained flat for the past three quarters in 2022 following operational challenges and rising input costs. The company will report its Q4 results on February 15. Consensus estimates for sales stood at $2.8B. This would bring the overall sales in 2022 to $11.1B, down -8.1% from a year ago.

Fig.5: Reported EPS of Barrick Gold versus Analyst Forecast. Source: CNN Business

On the other hand, despite performing on par with analysts’ expectations, the company’s reported EPS in Q3 was $0.13, far below those in the first half of the year, at $0.26 (Q1) and $0.24 (Q2) respectively. Analyst forecast for EPS in Q4 2022 stood at $0.18, bringing the overall annual EPS to $0.81, down -43% from the previous year.

Technical Analysis:

The #BarrickGold share price last closed slightly above the low estimates of analysts ($15), but remained pressured below resistance $17.30 (FR 23.6% extended from the highs seen in August 2020 to the lows in November 2022). A close above this level would lead the bulls to continue testing minor resistance $18.45, followed by $20 (FR 38.2%, also the median estimates of analysts). Otherwise, if the bullish breakout is unsuccessful, the company share price may resume its downtrend, towards the November 2022 lows at $13, followed by the August 2022 lows at $10.42.

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Larince Zhang

Market Analyst

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