Should You Buy Northern Star Resources Limited at this Share Price?

What Happened to the NST Share Price?

Northern Star Resources Limited [ASX:NST] was up by 2.73% in early afternoon trading. The stock was trading at a price of AU$2.26 a share at 2pm. Following concerns from Europe overnight, the Aussie market tanked, dragging down financials and miners. Resources companies held up relatively well due to stronger commodity prices.
With the oil price on a trend to gain further, gold picked up one cent. The precious metal was also seen as a hedge against disappointing US data and Eurozone risks. The Fed now is increasingly leaning towards a dovish stance as growth remains soft.

Why Did This Happen to NST Shares?

Northern Star was truly a ‘star’ for long-only investors in late 2014. The stock jumped by more than 100% over a few months between late 2014 and early 2015. Right now, the trend of hyper- –speed rally has stopped.
Most analysts have the stock on either ‘outperform’ or ‘hold’. It seems the bullishness on NST has not yet subsided. The consensus forecast for sales and earnings are both positive for the year 2015 and 2016.

What Now for NST?

There is no doubt that NST has great fundamentals. For that alone, investors should have a warm reception of the stock. However, what can undermine or help the stock’s value is the price of gold.
There are always voices out there calling for an inevitable gold bull market. These voices stem from the ‘gold bugs’, and those who have lost all faith in the Fed and the US dollar. Of course, let’s not forget those who are predicting Armageddon in the global financial system not too long from now.
My baseline forecast for gold is not terribly exciting. With a current price of around US$1,215, I believe gold could be fairly valued. I don’t have a strong conviction in gold. I, it may fluctuate between its current price and the $US$1,340 mark. Of course, that is still a 9% gain on the current level.
Risk is going to be an important supporter to gold pricing. There is no shortage of risks in the current climate. We have basic economic uncertainties around the world, and we have Greece. These two events will be helpful to the gold price going forward.
The reflation in commodities will also be supportive to the gold price at a fundamental level. Investors should buy NST based on fundamentals and a long term outlook for gold. The long term outlook for gold pricing is positive.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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