Dovish Yellen Boosts Barrick Gold Corporation (ABX)

Barrick Gold Corporation (USA) (ABX) is heading higher on bullish brokerage notes and dovish comments from Fed Chair Janet Yellen

by Kirra Fedyszyn

Published on Mar 29, 2016 at 3:06 PM
Updated on Jun 24, 2020 at 10:16 AM

The highlight of today for many traders was a speech from Fed Chair Janet Yellen, in which she advised caution in adjusting monetary policy -- meaning that interest rate hikes should remain on a gradual schedule. These dovish remarks sent the value of the dollar falling, and gave gold futures a healthy boost. The SPDR Gold Trust ETF (GLD), for example, is up 1.5% at $118.67, and if it can keep the rally going for the next two sessions, the ETF could close above its 36-month moving average for the first time in three years -- an indicator that may signal a longer-term trend reversal. And as gold heads higher, Barrick Gold Corporation (USA) (NYSE:ABX) is riding sector tailwinds and enjoying a few bullish brokerage notes.

Ahead of the open today, CIBC and Canaccord Genuity raised their price targets on ABX to $13.25 and C$21.50, respectively. TD Securities, meanwhile, adjusted its target down by 50 cents, to $17.50. The stock is up 3.9% at $14.14, bringing its year-to-date lead to 91.5%.

From a technical standpoint, ABX has been on a tear this year. The shares hit an annual high of $15.52 less than two weeks ago, and have outperformed the broader S&P 500 Index (SPX) by a hefty 87 percentage points over the last three months. ABX has also enjoyed support on its journey higher in the form of its 40-day moving average, which has contained its pullbacks since mid-December.

160329ABX

But sentiment in and out of the option pits is still quite bearishly skewed. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ABX's 50-day put/call volume ratio of 0.81 is in the top percentile of its annual range. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.27 is higher than 95% of the past year's reading -- indicating near-term traders have rarely been so put-heavy.

Today, however, ABX call volume is outnumbering put volume by nearly 3-to-1, with about 12,000 call options changing hands so far. And it looks like there may be some buy-to-open activity at the weekly 4/8 14.50-strike call, as well as the weekly 4/1 14-strike call -- the two most active options today.

Analysts have not yet taken a shine to the stock, either, with 10 out of 14 maintaining "hold" or "strong sell" ratings. Further bullish notes from these remaining skeptics, as well as an unwinding of bearish sentiment among option traders, could be enough to spur Barrick Gold Corporation (USA) (NYSE:ABX) on to new highs.

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