Why Is Barrick Stock Down When Gold Prices Up?

Barrick Gold Shares (NYSE: GOLD) is down about 21% over the past two months and is currently trading at about $17 per share. This compares to the S&P 500, which continues to rise about 3%, and the gold price, which has fallen about 2% over the same period. The underperformance comes despite the fact that gold prices have soared this year, from levels of around $2,050 per ounce in early January to around $2,650 currently – one of the highest annual increases in a decade. Several factors have driven the gold price. US inflation is moderating, market volatility and geopolitical risks have led investors to the safe haven of gold. The consumer price index for November rose 2.7%, slightly higher than October’s 2.6%, and this could pave the way for a Fed rate cut in the near future. So why haven’t shares of Barrick – one of the world’s largest gold producers – risen with this year’s gold price boom?

Barrick has faced significant operational challenges due to production setbacks in the first half of the year, with slower than expected ramp-up at the Pueblo Viejo mine, maintenance activities and lower ore grades at some mines. However, Pueblo Viejo has increased production on a quarterly basis while reducing unit costs as part of the ongoing ramp-up and stabilization of the plant in the third quarter of 2024. In the third quarter of 2024, Barrick sold 967,000 ounces of gold, down from 6% compared to the 1,027,000 ounces in the same quarter last year. year. Although Pueblo Viejo’s production this year will be higher than in 2023, difficulties during the start-up phase are resulting in lower than expected production levels. Although progress has been made at Turquoise Ridge in stabilizing the processing plant and increasing underground production, progress is slow and production is expected to be below expected levels. So at a time when gold prices and margins are rising, Barrick is plagued by operational issues that are expected to impact production into 2025 as well. Additionally, if you want to benefit from a smoother ride than an individual stock, consider the High quality wallet, which has outperformed the S&P and returned >91% since inception.

The cost situation was also mixed. Barrick’s all-in maintenance costs rose 20% year over year, reaching $1,507 per ounce in the third quarter. This increase is likely due to lower production, which affects economies of scale, and inflationary pressures on inputs such as labor. Additionally, higher gold prices could cause miners to become less disciplined in controlling costs. The faster rise in costs for Barrick could push investors toward more cost-efficient mining companies.

GOLD stock’s decline over the past three years has been far from consistent, although its annual returns have been significantly less volatile than the S&P 500. Returns for the stock were -13% in 2021, -6% in 2022 and 8%. in 2023. The Trefis, on the other hand High quality walletwith a collection of 30 stocks, is less volatile. And that is true outperformed the S&P 500 every year during the same period. Why is that? As a group, HQ Portfolio shares delivered better returns with less risk compared to the benchmark index; less of a roller coaster ride as evidenced HQ portfolio performance metrics. Given the current uncertain macroeconomic environment surrounding rate cuts and multiple wars, GOLD could face a similar situation as in 2021 and 2023 and underperform the S&P in the next twelve months – or will there be a recovery?

Barrick’s performance is expected to improve in the fourth quarter and next year, helped by the continued ramp-up of the Pueblo Viejo plant expansion, increased throughput at Nevada gold mines and higher grades at Kibali. The company has recorded a 44% year-on-year increase in net earnings per share through nine months of 2024, driven by higher gold prices. Furthermore, Barrick’s move to scale up its copper operations could provide additional upside potential for the stock given its application in a host of futuristic industries, including electric vehicles and the renewable energy sector. We have a price estimate of $21 for Barrick Gold, which is about 25% above the current market price. See our analysis of Barrick Gold Rating for more information. See also our analysis of Barrick Gold Earnings for more details on the company’s key revenue streams and how they are trending.

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