The economic turmoil over the past months had resulted in a remarkable rally in gold, but in recent weeks, the situation has changed, and that has affected gold stocks like Barrick Gold Corp (NYSE:GOLD) as well. The gold miner hit its highs back in May, but since then, it has declined significantly. In such a situation, it is worthwhile to figure out if investors should consider the Barrick Gold stock as an investment.
Around a month ago, the precious metal was trading at $1750 an ounce, but that has now dropped to $1725 per ounce, and it might well be a case of a pause in the rally before it takes off again.
Back in 2011, gold had hit a high of $1900 an ounce, and analysts believe it could hit $2000 an ounce by 2021. One analyst has even set a target price of $3000 an ounce in 18 months. There are some factors that need to be kept in mind regarding the possibility of higher gold prices.
The interest rates are not going to be raised by the United States Federal Reserve, and that is a significant positive for gold prices. On the other hand, the economic recovery might also take a lot of time, and in such a situation, gold could emerge as a safe haven investment.
In addition to that, fast recovery in the economy could lead to significant inflation, and that could again result in investors hedging their cash through investments in gold. The stock declined from $39.20 a share in May to $32 a share now, and there are some things that need to be considered here.
The company could end the year with no net debt at all. On top of that, investors should not use that the company controls 5 of the biggest ten mines in the world and is now in a position to generate considerable free cash flow. The decline might have been due to profit-booking, but it is believed that the Barrick stock is fairly priced at this point, and if gold starts rallying again, it could prove to be another positive trigger.