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When stocks get volatile and global economic conditions become unpredictable, investors often flock to gold. Recently, the spot price for an ounce of gold broke through the $1,500 level for the first time in more than six years. Fundamental factors driving the uptrend include the potential impact of trade wars on global GDP growth, increased volatility in U.S. stock markets, the uncertainty surrounding the upcoming Brexit decision in Europe and uncommon negative interest rates in countries ranging from Germany to Japan to France and to Switzerland. From a technical standpoint, gold has broken out of a three-year trading range between $1,200 and $1,340 and appears to be in a bullish pattern of higher highs and higher lows that dates back to December 2016. Argus Research’s forecast trading range for gold in 2019 is $1,200-$1,550, with a yearly average of $1,400. This compares to average gold prices of $1,265 in 2018; $1,277 in 2017; $1,258 in 2016; and $1,155 in 2015. As long as high volatility and trade war fears are part of the market conversation, gold is likely to remain in demand.
Barrick Gold Corporation (NYSE: GOLD)
Argus recently raised their rating on the GOLD shares to BUY. Barrick engages in the production and sale of gold, including exploration, development, mining and processing. The upgrade is based on expectations for higher gold prices in the coming quarters and management's upwardly revised production guidance. They also expect the company to benefit from the recent Randgold acquisition and look for higher earnings over time. They are setting a target price of $22, implying a total potential return of 16% including the dividend.