HSBC has cut its forecast for the price of gold and downgraded Barrick Gold (ABX) and Yamana Gold (AUY) in the process.
REUTERS HSBC lowered its 2014 price target for gold from $1,435 an ounce to $1,292 an ounce, while it dropped its 2015 forecast from $1,395 to $1,310.
As a result, HSBC’s Patrick Chidley and team downgraded three stocks: Barrick Gold, Yamana Gold and African Barrick Gold.
Chidley explains why he downgraded Barrick Gold…
Based on the changes to our metals price forecasts and other model modifications, our TP falls to USD16.50 from USD19.60, and we are lowering our rating from N(V) to UW(V). Barrick may benefit this year from new mine plans which could radically improve near term cashflow, but we expect this to come at the expense of reserves and mine life.
and Yamana Gold:
Based on the changes to our metals price forecasts and other model modifications, our TP falls slightly to USD8.20 from USD9.60, and, we are downgrading the stock from N(V) to UW(V) on valuation and also concerns about the project portfolio. Despite the company's low average costs, we believe this is more than factored in, given the USD7bn market capitalization, relatively small production base and our concerns about long term sustainability of profitability at El Penon.
Chidley cut African Barrick Gold to Underweight from Neutral courtesy of the stocks 22% rise since the beginning of December. Better bets include Royal Gold (RGLD) and Randgold Resources (GOLD), among others, Chidley says.
Barrick Gold has dropped 2.8% to $18.72 at 2:32 p.m. today, while Yamana Gold has fallen 2.7% to $9.56. Randgold Resources has declined 0.7% to $67.50 and Royal Gold is off 2.2% at $54.85. The Market Vectors Gold Miners ETF (GDX) has fallen 2.6% to $23.08, as the SPDR Gold ETF (GLD) has dipped 0.1% to $119.55.
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