Gold price rebounds, Barrick Gold shares set to push higher

Gold prices rebounded on Thursday and look ‘on the cusp of a bullish recovery’, according to IG analysts, with Barrick Gold capable of pushing its shares higher as the precious metal surges.

Gold prices hit a high of $2075 an ounce in early August, with the precious metal falling to a month-low of $1912. The price has since rebounded to trade at $1924 at the time of publication and could be ‘on the cusp of a bullish recovery’ with further US stimulus on the way.

The US Federal Reserve chairman Jerome Powell told onlookers at the annual Jackson Hole Symposium that monetary policy decisions will be based on an average inflation target. Essentially, it will allow inflation to ‘run hot’ and overshoot the 2% objective following periods of subdued inflation below 2%.

In response, the US dollar fell after the announcement, with gold prices moving into positive territory as investors interest in safe haven assets continues to swell amid rising currency volatility.

US dollar loses ground to sterling

The GBP/USD managed to rally throughout the week, putting it on course to target the $1.325 zone that marked the highs last week, according to Chris Beauchamp, chief market analyst at IG.

‘This impressive recovery revives the more bullish view, although a break out above last week’s highs is still needed to cement this view,’ he said.

’For now bears seem to be out of luck, unless we see a reversal that wipes out the gains of the week so far and then breaches $1.305 to the downside.’

Barrick Gold shares rally as gold prices surge

The US-based mining company, Barrick Gold, continues to see its share price soar amid rising gold prices, with the stock up 54% year-to-date.

Barrick Gold saw its shares jump earlier this month after financial filings showed that Warren Buffet-led Berkshire Hathaway had acquired a stake in the business.

The gold miner stands to benefit from the rising cost of the precious metal, with the company reporting a strong set of Q2 earnings in August that showed it was on track to hit its annual production targets for 2020, despite the economic impact of Covid-19.

Second quarter results show year-to-date gold production of 2.4 million ounces, at the mid-point of its 4.6 million to five million ounce annual guidance, driven by strong operating performances, particularly from Nevada Gold Mines (NGM) in the United States, Loulo-Gounkoto in Mali and Kibali in the Democratic Republic of Congo, the company said.

Barrick Gold has also increased its quarterly dividend by 14% to eight cents per share. Its quarterly dividend has more than doubled since the announcement of its merger with Rangold in September 2018.

Barrick Gold is trading at $28.51 per share at the time of publication.

Citigroup analysts think gold could top $2500 an ounce

The value of the US dollar has waned as a result of president Donald Trump’s poor response to the coronavirus pandemic, with the greenback under threat of losing its clout as the world’s reserve currency.

As a consequence, interest in ‘safe haven’ assets like gold is surging, with analysts from Citigroup believing investors could push the previous metal as high as $2500 an ounce.

‘When investors are hungry for gold, the metal has a habit of rising exponentially which has no parallel amongst metals,’ Citigroup analyst Heath Jansen said in a note to investors.

‘On a worst-case scenario for euro sovereign debt and US fiscal problems, we believe gold could repeat the extent of the 1970-1980 gold bull market, implying upside-risk to above $2500 an ounce.’

‘A short-term (but not long lasting) large spike in gold is still possible in our view,’ he added. ‘We would now rate that probability as above 25%, up from below 5% just weeks ago (because of increased sovereign financial issues), and growing.’

Gold price outlook: technical analysis

Gold has managed to rebound sharply yesterday, following a drop towards the 76.4% Fibonacci support level, according to Josh Mahony, senior market analyst at IG.

Given the long-term uptrend in play here, there is a strong chance we are on the cusp of a bullish recovery. Today will see a significant focus on the precious metal sphere, with Powell’s Jackson Hole appearance raising the topic of further easing from the Fed, he said.

‘From a trading perspective, gold needs to break from the pullback we have seen over the past week,’ Mahony said. ‘That would require a break through the $1962 level, which would signal the potential beginning of another bullish phase to bring the wider trend in play.’

‘Until that break occurs, there is still a chance we could see gold turn lower to continue the recent weakness,’ he added.

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