Since gold and gold mining stocks took a precipitous dive in late-October there is only one large cap gold mining stock which has seen its share price actually rise:
During the last 3 months ABX shares have actually gained more than 10% while the GDX has declined more than 19%. This tremendous outperformance is the result of Barrick’s prudent cost-cutting and leaning down its global mining operations. While the rest of the gold mining sector is still searching for sustainable signs of a bottom, ABX appears to have put in a bottom months ago:
Notable momentum & volume divergences at the September low in ABX – head & shoulders bottom in place and ABX is one of the only senior gold producers within a stone’s throw of its 200-day simple moving average.
Yesterday after the close Barrick informed the market that it sees up to $3 billion of impairment charges resulting from depressed copper and gold prices. Moreover, the company is now using US$1,000/oz gold as its base case price for gold in 2016. The market applauded this cautious approach and has thus far bid up ABX shares by more than 2% on a day in which gold is flat.
With most gold miners are set to release Q4 earnings and annual reports next month we are likely to see more ‘kitchen sink’ quarters with large impairment charges from gold producers. Major market bottoms are made on bad news and there is no shortage of that right now in the precious metals mining space – the fact that the sector has not made a new low despite an intensification of negative news and sentiment is a green shoot worth keeping an eye on over the coming weeks.