Will Barrick Gold stock sparkle after falling 25% in six months?
Barrick Gold Stock (NYSE: GOLD) has fallen 25% in the past 6 months and is currently trading at $21. The decline in stock prices was mainly due to weak gold prices. After surging from $1,500/oz in January 2020 to over $2,000/oz in September 2020, gold prices have since remained volatile and have, in fact, fallen significantly. The weakness in the price of gold was driven by the gradual lifting of lockdowns, which led to expectations of a faster economic recovery. Additionally, the successful deployment of a vaccine has led to overall positive sentiment in the market, in turn affecting precious metal prices. The price of gold currently sits at $1,727 per ounce, marking a 14% decline from its September 2020 high. The recent drop in gold prices has impacted Barrick Gold shares , as the company derives 94% of its revenue from the yellow metal. But will Barrick Gold stock continue its downward trajectory over the next few weeks, or is a rally in the stock more likely?
According to the Trefis machine learning engine, which identifies trends in a company’s stock price data over the past ten years, GOLD stock returns average close to 10% then three months (63 trading days) period after experiencing a 25% decline in the previous three-month period (63 trading days). Notably, however, the stock is likely to surpass the S&P500 over the next three months, with an expected return that would be 7.4% higher than the S&P500.
But how would those numbers change if you wanted to hold GOLD stock for a shorter or longer period? You can test the response and many other combinations on the Trefis Machine learning to test the odds of GOLD stocks rising after falling and vice versa. You can test the chances of recovery over different time intervals of a quarter, a month or even a single day!
MACHINE LEARNING ENGINE – try it yourself:
IF The GOLD share evolved by -5% over five trading days, THEN over the next 21 trading days, GOLD stock is moving an average of 1.3%, implying a return similar to that of the S&P500.
More importantly, there is a 51% chance that a positive return over the next 21 trading days and a 46% chance of a positive excess return after a variation of -5% over five trading days.
Some fun scenarios, FAQs and making sense of GOLD stock movements:
Question 1: Is the average return of Barrick Gold stock higher after a decline?
Consider two situations,
Case 1: Barrick Gold stock drops -5% or more in one week
Case 2: Barrick Gold stock rises 5% or more in one week
Is the average stock return of Barrick Gold higher in the next month after Case 1 or Case 2?
GOLD stock fares better after case 2with an average yield of 1.3% over the following month (21 trading days) in case 1 (where the stock has just suffered a loss of 5% over the previous week), against an average return of 2.5% for case 2.
By comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days in Case 1, and an average return of just 0.5% for Case 2, as detailed in our dashboard which details the average return of the S&P 500 after a decline or rise.
Try the Trefis machine learning engine above to see for yourself how Barrick Gold stock is likely to perform after a specific gain or loss over a period of time.
Question 2: Does patience pay off?
If you buy and hold Barrick Gold shares, it is expected that over time, the short-term fluctuations will cancel each other out and the long-term positive trend will favor you – at least if the company is otherwise strong. .
All in all, according to data and calculations from the Trefis machine learning engine, patience absolutely pays off for most actions!
For the GOLD stock, the returns over the next N days after a variation of -5% over the last five trading days is detailed in the table below, along with the S&P500 returns:
Question 3: What about the average return after a rise if you wait a bit?
The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, however, if a stock has been gaining in the past few days, you’re better off avoiding short-term bets for most stocks – although GOLD stock seems to be an exception to this general observation.
GOLD returns over the next N days after a variation of 5% during the last five trading days is detailed in the table below, along with the S&P500 returns:
It is quite powerful to test the trend for yourself for Barrick Gold stock by changing the entries in the charts above.
While the GOLD stock may have moved, 2020 has created many price discontinuities that can provide interesting trading opportunities. For example, you will be surprised how the valuation of stocks for Compass Minerals vs. Southwest Gas shows a disconnect with their relative operational growth. You can find many discontinuous pairs here.