Barrick Gold stock (NYSE: GOLD) dropped 24% in the last 3 months and currently trades a little over $22. The decline in stock price was mainly driven by weakness in gold prices. After registering an impressive rise from $1,500/ounce in January 2020 to over $2,000/ounce in September 2020, gold prices have since then remained volatile and have, in fact, largely declined. The price currently stands at $1,822/ounce. Weakness in gold price was driven by gradual lifting of lockdowns, which led to expectations of faster economic recovery. The recent drop in gold prices took a toll on Barrick Gold’s stock, as the company gets 94% of its revenue from the yellow metal. But will Barrick Gold’s stock continue its downward trajectory over the coming weeks, or is a bounce in the stock more likely?
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last 20 years, returns for GOLD stock average close to 4% in the next three-month (63 trading days) period after experiencing a 24% drop over the previous three-month (63 trading days) period. Notably, though, the stock is likely to outperform the S&P500 over the next three months, with an expected return which would be 1% higher compared to the S&P500.
But how would these numbers change if you are interested in holding GOLD stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test GOLD stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!
MACHINE LEARNING ENGINE – try it yourself:
IF GOLD stock moved by -5% over 5 trading days, THEN over the next 21 trading days, GOLD stock moves an average of 1.4 percent, which implies a return which is similar to that of the S&P500.
More importantly, there is 51% probability of a positive return over the next 21 trading days and 46% probability of a positive excess return after a -5% change over 5 trading days.
Some Fun Scenarios, FAQs & Making Sense of GOLD Stock Movements:
Question 1: Is the average return for Barrick Gold stock higher after a drop?
Answer:
Consider two situations,
Case 1: Barrick Gold stock drops by -5% or more in a week
Case 2: Barrick Gold stock rises by 5% or more in a week
Is the average return for Barrick Gold stock higher over the subsequent month after Case 1 or Case 2?
GOLD stock fares better after Case 1, with an average return of 8% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 3% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Barrick Gold stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
Answer:
If you buy and hold Barrick Gold stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For GOLD stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
Answer:
The average return after a rise is understandably lower than a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
GOLD’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Barrick Gold stock by changing the inputs in the charts above.
At the current level, investors have an opportunity to see a potential upside of 45% in Barrick Gold’s stock, which as per Trefis, has a fair value of $32 per share
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
