Gold has enjoyed a powerful run in recent months, fuelled by escalating geopolitical risks, expectations of lower interest rates, and persistent central bank demand as many countries diversify holdings away from the $US.
That strength has flowed through to gold equities, with Barrick rallying sharply in tandem with the metal – our position up ~60% even after weakness overnight.
While we continue to view Barrick as one of the highest-quality names in the sector, with a strong project pipeline, good margins, a clean balance sheet and shareholder-friendly actions, we believe the current setup warrants profit-taking. The stock and the broader gold-miner peer group are trading at elevated technical and sentiment levels, which presents risk, a theme that came to pass overnight with gold down $US230/oz and Barrick falling by ~9%.
Sentiment toward gold remains extremely bullish, with speculative futures positioning near multi-year highs and technical indicators flashing stretched readings. One night of weakness does not instantly alter that.
- In our view, the risk-reward has skewed to the downside in the short term — momentum may be running ahead of fundamentals, leaving little margin for disappointment if bond yields or the US dollar rebound.
The gold price tailwind has been undeniable; however, operationally, cost pressures remain in the sector – the impact has just been superseded by the ongoing strength in the gold price. If gold corrects further, gold equities will suddenly look expensive.
- Accordingly, we plan to sell Barrick, locking in gains now and will look to re-engage later when momentum has eased, fundamentals realign, and a clearer margin of safety emerges.
MM is looking to sell Barrick (B US)
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