After reviewing the macro risks involved in the gold market, and analyzing the stability of the copper market, UBS analyst Andreas Bokkenheuser weighed in on both Barrick Gold Corporation (USA) (NYSE:ABX) and Freeport-McMoRan Inc (NYSE:FCX). Let’s dig deep to see if these stocks can hold their weight amidst global economic uncertainty.
Barrick Gold Corporation (USA)
UBS analyst Andreas Bokkenheuser explains that an upside exists for ABX if real rates continue to fall and settle at a lower equilibrium, thus pushing the price of gold up to an estimated $1,500-$1,575 per ounce.
On the opposite end of the spectrum, gold could experience an equity selloff which would damage its price and ultimately the value of ABX’s shares. The analyst assumes that the price of gold could drop to $1,380 per ounce in the case of a “violent” selloff.
The analyst reiterates a Neutral rating for ABX with a price target of $21.50, marking a 6% downside from current prices.
TipRanks statistics shows 38% of analysts maintaining a Buy rating for ABX, while 50% issue a Hold rating, and the remaining 12% uphold a Sell rating for the stock. The consensus price target for ABX is $20.77, marking a 6.94% downside from current prices.
Bokkenhauser also reiterated a Neutral rating for FCX after analyzing how China’s credit injection and significant increase in grid spending and property sales could affect the price of copper.
The analyst notes that, if an upside scenario were to present itself, a decreasing supply of fuel and steady demand for the product could potentially swing risk towards investor advantage. Continuous policy easing, looser property investment policies and ongoing stimulus into infrastructure in China are primary drivers to demand, and with limited supply, the excess demand could drive prices up.
In a downside scenario, Chinese stimulus could start to weaken as historically seen after a credit injection. The analyst provides, “Our China property team expects recent growth to lose momentum as the government 1) tightens home purchase restrictions in tier 1-2 cities following rampant housing inflation; and 2) limits housing starts in lower tier cities in an attempt to reduce excess inventories.” Given this possible scenario, the analyst would expect copper prices to fall down to around $1.80 per pound.
According to TipRanks, only 29% of analysts issue a Buy rating for FCX, while 57% maintain a Hold rating, and 14% uphold a Sell rating for the stock. The consensus target price for FCX is $12.00, marking a 7.14% upside from current prices.