Gold prices climbed on Tuesday as several central banks were set to announce policy decisions this week and market concerns over prolonged disruptions to oil shipments eased.
Morgan Stanley upgraded shares of Gold Fields Ltd (GFI) to Overweight, stating that the stock's prior underperformance has created an attractive risk-reward setup.
So far this year, Gold Fields shares have lagged global peers by roughly 16%. But Morgan Stanley analyst Christopher Nicholson said the market has already priced in most of the uncertainty surrounding the Tarkwa mining lease.
"We believe the Tarkwa lease risk is largely reflected in the share price," Nicholson said. "Additionally, a potential transaction with Northern Star could be accretive on a pro forma basis. We have updated our earnings forecasts and target price based on our latest gold price assumptions; the risk-reward for gold skews to the upside."
Overall, the analyst remains bullish on gold futures, naming the yellow metal as the top commodity pick and forecasting an average gold price of $5,050 per ounce in 2027.
Nicholson believes government debt concerns, possible intervention measures to cap bond yields, oil price volatility, and continued central bank gold purchases will all provide support for gold prices.