Goldman Bullish on Barrick and Gold Price

With the potential backdrop of a U.S. recession, Goldman Sachs analysts are recommending that investors think defensively when it comes to investing in commodity stocks. They prefer sectors that have little sensitivity to the U.S. consumer, namely agriculture, gold and specialty packaging.

Their absolute top pick in the materials space is Barrick Gold Corp. (ABX), which they rate a "buy" with a target of $66 a share. They point out that Barrick continues to unlock value from its merger with Placer Dome Inc., especially on greenfield projects like Cortez, Bald Mountain and Pueblo Viejo. They estimate that Barrick will increase its gold reserves to more than 150 million ounces when the company reports year-end results in February.

"Barrick is the largest gold producer in the world with an expected 2008 production of 8.3 million ounces, and the strongest project pipeline among its precious metal peers, in our view," they wrote in a note to clients.

The analysts are also very bullish on the price of gold. They are calling for average prices of $910 an ounce in 2008 and $870 an ounce in 2009. They also figure there is upside risk to that forecast should there be an extended slowdown in global GDP this year.

They see a 31% upside to the $66 target on Barrick shares. The stock is currently trading at 9.7 times and 7.4 times their 2008 cash flow and EBITDA estimates.