Should You Buy Newcrest Mining Shares at This Price?

What happened to the NCM share price?

My question to you is simple: Did you trade the Brexit successfully? If you made a move during the Brexit event, then Newcrest Mining Limited [ASX:NCM] could have been a good candidate.

The stock has soared more than 14% since last Friday. Today, the stock is up again, bringing in almost 5% by 2:40pm AEST.

Why did Newcrest Mining shares do this?

Now, to be fair, you would have only made 3.46% if you bought at Monday open. This was the time when NCM came onto my radar. So far, the stock is up for the week, after some rather turbulent sessions throughout this week.

Let’s face it; the market did not anticipate Brexit last Friday. I was sure the vote could go either way, mostly due to my lack of knowledge on the matter. I knew the polls were favouring ‘Bremain’, but they were only online polls. Similar to sentiment surveys, they are inaccurate and definitely not the real thing, so I wouldn’t trust them with my money.

So you can discount the Friday spike in gold altogether since there was no basis to bet on the exit vote at the time.

That leaves us with the week just gone by. Wednesday and Thursday were interesting days. There were more bearish views on gold than usual, because there were signs markets were returning to normality. This meant safe-haven money would have had to come out of gold again, heading back to risky assets instead. Then, today, the market was up.

My only description for all these movements: volatility. Markets are volatile, and so is gold; however, gold benefits from volatility in general. That means you shouldn’t be surprised that it is up today.

What now for Newcrest Mining Limited?

What should your play be going into next week? It is hard to argue against gold at this point. It is going with momentum, and NCM is right up there as a good momentum stock. Fundamentally, NCM can go either way in the coming weeks.

I am cautious on gold producers such as NCM because the stock has risen markedly since the beginning of the year. It is completely conceivable for gold to rise during volatile times, but it cannot deviate from the commodity basket for too long. That means either the commodity basket will rise or gold has to come down somewhat — or both can take place simultaneously.

I have no objection to holding NCM right now, but I would be careful about it.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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