Barrick Gold Corporation posted solid second-quarter earnings with $2.01 billion in revenue on the back of rising gold prices. The gold miner’s stock gained 195% year-to-date, outperforming AMEX GOLD MINER IDX, which rose by 126.81% during the same time.
With another hike expected in gold prices, the company is well positioned to post a solid third quarter as well. In a recent research report from Credit Suisse, the investment bank reiterated its $1,475 per troy ounce price target for the year end based on continued ETF investments in both bar and gold coins, prolonged macro uncertainty, and negative interests rates along with declining supply.
Gold has had a great year so far. In addition, fears of economic slowdown worldwide and general uncertainty in the world, including the possibility of Donald Trump coming to power, and low levels of European bonds have made the yellow metal a highly attractive investment for both investors and central banks.
For the first time in history investors have been increasingly buying gold for back-to-back quarters. According to a recent research report from Credit Suisse, the total demand for gold increased by 12% to 1,055 tons in the second quarter of 2016, whereas the supply for the yellow metal rose by 10% to 1,145 tons primarily due to recycled gold.
Prices rose by 7% from the first quarter of this year due to the demand for Gold exchange-traded funds (ETF’s). Individual investors including hedge funds have been piling up on gold, pushing investment to its biggest first-half gain since 1980.
According to Credit Suisse, the demand for gold bars and coins remained relatively flat in the second quarter of this year at 212 tons, compared to 209 tons in the same period last year. Interestingly, demand from Europe remained flat as Brexit took place toward the end of the quarter.
As per the investment bank, central banks continued buying gold. The investment bank also believes that elevated uncertainty caused by Britain impending exit of the European Union (EU), along with concerns regarding the strength of Italy's banks, the potential of referendums in other EU nations, and negative interest rate policies of the European Central Bank (ECB) will give rise to European physical demand for gold in third quarter of this year.
Gold prices currently stand at $1,335.97 per troy ounce. Weak jewelry demand in both countries gave rise to speculation of a decline in demand.
The investment bank, however, believes that India's jewelry demand will pick up soon as the country’s gold-buying festival season (Holi) begins in mid-August. As prices stabilize above $1,300 per ounce, Credit Suisse expects gold buying to gain momentum in China again. The expected rise in demand for gold could further add fuel to the ETF-led rally.
Some analysts have also highlighted the probability of prices heading southwards. According to the United States Department of Labor (Bureau of Labor Statistics), payroll employment rose by 255,000 in July.
Interest rates are also expected to rise in the latter half of the year, especially after the elections, which may drive the prices of the US Dollar up and inversely affect the price of gold.