JPMorgan Chase & Co., a multinational banking and financial services holding company, released its report on Barrick Gold Corporation (USA) today based on its second quarter results, which the company announced last week. The firm repeated the Neutral stance for the company’s stocks as its cash flow had become more difficult to forecast. However, in late-afternoon trading last Wednesday, the company’s stocks have dropped due to the falling of gold prices. It puts a stop to their longest six-week rally.

barrickOperation Analysis

Barrick Gold, which is considered the industry’s largest gold reserves and reserves company, announced its result for the second quarter of fiscal 2016 on July 27, 2016. It produced 1.34 million ounces of gold during the quarter and its applicable cost of sales was $1.23 billion, while the all-in sustaining cost was $782 per ounce. Both the revenues and earnings, however, are below the consensus estimates. The gold mining company reported revenue as $2.012 billion, $61 million short of the Street’s projection, and its $140.145 million net income missed the market’s expectation of $166.8 million.

Despite the missed consensus expectations, the company did perform better in net earnings as compared to the prior year. The decline in operating costs, favorable foreign exchange movement, reduced royalty expenses, lower costs of labor, contractors, and consumables all contributed to this earnings escalation.


Decline in Demand for Gold

Although Barrick’s second-quarter results are solid, it might be short-lived because of the decline in gold demand. This drop is a result of a private report from ADP Research Institute that showed strong data on the US job market, undercutting the need to invest in securities like gold, Bloomberg reports.

This demand regression for the metal started in the top two gold consumers, China and India, and it forecasts the same fate for other countries’ claims. Although the demand in this year’s 2Q is higher than the same quarter last year, the overall global demand for gold has collapsed 23% to 1,479 tonnes in the first six months of this year. According to GFMS, demands from China slumped to 83.3 tonnes this quarter, down 24.1% from the same period last year. India followed suit to this. The metal’s demand in this country has decreased 56.3% this quarter as compared to last year’s second quarter, an impact by the higher prices for imported metal.

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