Barrick Gold Corp. (NYSE: ABX)
Barrick Gold is having an incredible day in the market. The rally is being driven by the higher prices of gold. Today, we'll talk about why gold is climbing in value, whether or not the rally is likely to continue, and what we can expect from ABX moving forward.
Why Gold Is Climbing In Value
Like any other commodity, the value of gold is determined by supply and demand. Naturally, as a company focused on gold, ABX is dependent on this supply and demand as well. However, unlike most other commodities, gold is considered to be a safe haven investment, which is exactly why we're seeing the gains in the value of the commodity that we're seeing at the moment. Just take a look at any stock market around the world. Chances are that what you're seeing is a sea of red. These declines were started by a recent market crash in China, leading to lower demand for stocks. As a result, investors are looking for ways to hold the value of their investing funds. To do so, many investors look to gold, increasing the demand for the precious metal and leading to an increased value. Because Barrick Gold has such a strong correlation with gold, the value of ABX is climbing as well.
Will ABX Gains Continue?
This is a bit of a tough call. With heavy volatility in the market worldwide, and so many factors leading to that volatility, making a prediction with regard to gold, and therefore ABX, becomes a bit difficult. Nonetheless, I believe that I have the answer. In my opinion, we can expect to continue to see gains in gold as well as ABX. Here's why:
- Conditions In China Are Not Getting Better – China's market crash fueled the rally we're seeing in gold as is. Unfortunately for China, as well as the rest of markets around the world, conditions in China simply aren't getting better. As a result, we can expect to see more volatility in the market, leading to more gains in gold and therefore, more gains in ABX.
- Conditions Outside Of China Aren't Much Better – While China did fuel the market crash, it's not the only region that is struggling at the moment. In fact, we're seeing negative activity out of Japan, Europe, and several other countries around the world. As a result, the markets in these countries aren't likely to do well any time soon either, leading to even further demand for gold and higher prices coming for ABX.
- The Federal Reserve – Finally, the Federal Reserve has added fuel to the already brightly burning fire. The Federal Reserve recently increased its interest rate and plans on doing so between 2 and 4 more times throughout the year 2016. When the Fed increases its interest rate, consumers are forced to pay higher interest. This leads to less spending money elsewhere and pain in corporate profits. As a result, we see a negative effect in the market. This negative activity is likely to lead to further declines in the market and strong gains in gold, leading to more upward movement in ABX.
The Bottom Line
The bottom line here is that due to economic blues around the world and moves made by the Federal Reserve, market activity is likely to continue on a bearish path for some time. As the market continues to follow the bearish path, gold is likely to continue in the upward direction. As a result, we can expect to see further gains in ABX.
What Do You Think?
Where do you think ABX is headed moving forward? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]