Should Gold Mining Analyst Downgrades Begin to Worry the Gold Bugs?

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The zany world of gold continues to surprise to the upside in 2016, peaking briefly just above $1,300 per ounce on the week ending May 6, 2016. After closing at roughly $1,288 on Friday the year-to-date rage onward and upward had gold up more than 21% measured by the SPDR Gold Shares (NYSEMKT: GLD).

There are of course reasons for gold’s surge so far in 2016. Still, one has to ask whether there has been too much of a good thing, if not for the shiny yellow metal itself, then perhaps in the gold miners.

24/7 Wall St. tracks many analyst upgrades and downgrades each day, to the tune of hundreds per week. Most analysts in 2016 have adjusted their analyst ratings and price targets up for the key gold miners during the 2016 rally.

Many of the gold miners have seen their shares rise massively in 2016. Does a rally of 83% since the end of 2015 in the VanEck Vectors Gold Miners ETF (NYSEMKT: GDX) explain that perhaps things could be getting overheated in gold miners?

Some analysts are now starting to fear that the run has been too much. Many of the gold miners are now trading well above their consensus analyst price targets. That is even after those targets have by and large been raised in recent weeks, and again, most analysts are still raising their price targets.

Investors in gold miners are not just investing in gold. It has been a leveraged gold bet in 2016 so far. But investors in gold miners and producers also have to know that they are taking on country risks, geopolitical risks, currency risks and individual company execution risks.


With this past week marking what at least so far has been a 2016 gold high, 24/7 Wall St. wanted to feature some of the analyst downgrades or more cautious views seen in recent trading days. Despite Merrill Lynch raising targets on five top gold stocks that are tracked by the firm, here are some of the cautious analyst calls in gold miners and producers.

BARRICK GOLD

Barrick Gold Corp. (NYSE: ABX) managed to rise 3.3% to $18.47 on Friday, but it was downgraded to Hold from Buy at Canaccord Genuity on Tuesday, May 3. In Canadian dollars, its target was raised to C$26.00 from C$23.50, versus C$23.83 close on Friday. This Canadian giant has a $21.5 billion market cap.

Barrick’s consensus analyst price target is down at $15.95, with a 52-week range of $5.91 to $19.50. Barrick shares are up 150% year to date.

RANDGOLD RESOURCES

Randgold Resources Ltd. (NASDAQ: GOLD) was downgraded to Sell from Neutral at Citigroup on Thursday, May 5. That did not prevent it from rising 5.5% to $89.45 on Friday, but the pre-downgrade price action had been down 10.8% at $85.29. Its earnings report signaled that production was down 11% from a year earlier.