Should You Buy Newcrest Mining Shares at This Price?

What happened to the Newcrest Mining share price?

Gold has had a terrific run this year. Newcrest Mining Limited [ASX:NCM] is up roughly 80% this year. However, gold stocks such as NCM have been under selling pressure in recent weeks. We ask: Is gold’s run over?

Why did NCM shares do this?

Newcrest Mining has been on my watchlist for some time. Gold stocks, which reflect the gold price — such as NCM — cannot be regarded as safe-haven assets this year. The strength in such stocks can only be regarded as ‘momentum’. This means that a lot of money went into gold to chase the high, which invariably pushed gold stocks higher.

I have been warning investors for some time on the possibility that gold might fall. The strong rally may falter while the entire commodity basket catches up to it, or it would fall to a more ‘reasonable’ level; or both can occur simultaneously.

I readily admit that I have kept gold stocks on my list as momentum trades. NCM is one of them; another is AngloGold Ashanti [ASX:AGG]. This week, I continue to run NCM in my hypothetical portfolio, but I can’t promise that it will still be there next week. This will depend on the degree of the correction.

What now for Newcrest Mining Limited?

Let me return to the earlier question: Is gold’s run over? That will depend on several things which are unpredictable at this point. The degree of uncertainty in the world remains high. With Brexit, Nice and Turkey, there is no telling what will happen next. Let’s throw in the China South Sea, North Korea and Russia, adding to our list of geopolitical risks this year.

Uncertainty is still there in the world, and can heighten at any point over the coming weeks. As a result, I don’t subscribe to the view that gold’s run is definitely over. After all, we have seen a few large corrections in gold over the last couple of months, which all ended in renewed highs eventually.

Of course, the ultimate truth will only come from the price of NCM. For me, if the stock goes into a solid correction, I will not keep it. If it does go back into a rally, for whatever reason, I am ready to trade more.
As I said before, investors need to be nimble in this environment.

Ken Wangdong
Analyst, Emerging Trends Trader

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