Gold Price and Newcrest Mining’s Share Price: Will Both Rise? (ASX:NCM)

Gold Price and Newcrest Mining’s Share Price: Will Both Rise? (ASX:NCM)

What does the rise in gold prices mean for Newcrest Mining Ltd [ASX:NCM]?

Is the Newcrest share price about to take off?

The $22 billion company may be well placed to take advantage of the current global uncertainty caused by the coronavirus.

Newcrest Mining Share Price - ASX NCM Gold

Source: Optuma

The NCM share price has fallen since August 2019, from a peak of $38.87 to the close (at the time of writing) of $30.94 — representing a 23.36% retraction. If gold is to continue its rise, NCM may also rise. Gold ETFs like GDX are yet to sell-off, strengthening this thesis.

Oil price, gold price, and COVID-19

Global markets are selling off sharply, with the COVID-19 virus the main culprit.

Then on Monday, Saudi Arabia set off an oil price war with one-time ally Russia. This sent oil prices crashing as much as 34% to a four-year low of $27.34, according to CNN Business.

In turn, major indices around the world were hammered, with energy sector stocks particularly affected.

But the gold price remains strong in the face of this turmoil, sitting at US$1668/oz at time of writing.

What does this mean for the price of gold and Newcrest Mining’s share price?

Historically, gold is seen as a safe haven investment when global markets go haywire. The gold price hit its highest trading price in over seven years on Monday, with the price breaking briefly above US$1,700.

You can see this play out in the chart below:

Gold Price AUD 2020 Chart - Gold Price Up

Source: Optuma

With this in mind, is now the turning point for Newcrest Mining Ltd’s [ASX:NCM] share price?

ASX NCM Share Price - Newcrest Mining Price Chart

Source: Optuma

Looking at the weekly movements of the Newcrest share price, it has been in a downtrend since the beginning of August 2019. From there it fell to the historical support level of $26.49 with just over a 61.8% retracement, a key Fibonacci ratio, before moving up to close above the 50% retracement level of $29.82, which was the close price at the time of writing.

The day-to-day fluctuations in price show some recurring support and resistance levels which may be of importance going forward.

Newcrest Daily Share Price Chart - ASX NCM

Source: Optuma

With the historical reliance on investing in gold in times of market volatility, the question becomes will Newcrest Mining follow the market and continue its downtrend, or, will its share price rise above $31.00 and beyond?

It is interesting to note that the Van Eck Vectors Gold Miners ETF [GDX] is holding up remarkably well in this downturn.

Around 4.5% of GDX’s holdings are in Newcrest Mining.

Harking back to the GFC, gold miner ETFs such as GDX were sold off along with most other equities.

So, the fact we haven’t seen a major, sustained sell-off yet in GDX, may mean the next gold bull run is just around the corner.

It’s just a theory, but one worth considering.


Lachlann Tierney,
For The Daily Reckoning Australia

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