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Monday, September 27, 2010

Barrick (NYSE:ABX) Sees $1,500 Gold in 2011

The largest gold mine in the world, Barrick Gold (NYSE:ABX), said it sees gold prices in 2011 "easily" surpassing $1,500 an ounce.

Barrick CFO Jamie Sokalsky cites the underlying supports which should ensure gold continues to rise, as the reason for his optimism.

Those supports include the European sovereign debt crisis which won't go away, geopolitical circumstances, macroeconomic issues, and supply and demand.

Taken together, Sokalsky is right, there is nothing to justify believing those issues are going to go away any time soon, and that guarantees the price of gold will continue to go up until it does.

Although Sokalsky didn't point to it specifically, the expected near-future quantitative easing by the Federal Reserve will be another part of the support foundation for gold.

At the London Bullion Market Association meeting, on average those attending believe gold prices will stand at over $1,400 at the same time next year.

As for how Sokalsky likes that potential in reference to Barrick, he sees them positioned strongly to move up with the price increase of gold, saying the elimination of hedges and prices locked in of future production concerning forward sales is good news for the company and shareholders.

Even though cash costs estimates will probably be at the top end because of royalties related to the increase in gold prices, that also will help increase margins for the same reason, with margins versus cash costs growing to over $700 an ounce in the second quarter.

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