Why Newcrest Mining is up 21% in three days

Shares in Newcrest Mining (ASX: NCM) shot up 21% in just three days last week, ending the week up 13% and recovering some of the 53% the shares have lost over the last 12 months. There are several reasons likely to be driving the rise.

One big factor that sent buyers clamouring back into the company is the rise in gold price towards the end of last week. The gold price jumped in response to a statement by Federal Reserve Chairman Ben Bernanke that the US will continue with its programme of quantitative easing. Gold is viewed by many as a hedge against quantitative easing and the resulting spurt in inflation.

Newcrest investors were also able to get excited by the falling Aussie dollar which will significantly shield Newcrest from the fall in gold price. The Australian dollar is down 11% against the US dollar this year and like most commodities gold and cooper are priced in USD.

Some of the smaller gold miners also saw jumps in their share price. Shares in Silver Lake Resources (ASX: SLR) climbed 3.31% while Perseus Mining  (ASX: PRU) rocketed 13.3%.

Foolish takeaway

Last week saw Credit Suisse downgrade its rating for Newcrest Mining from an “outperform” rating to “underperform”. It didn’t deter investors however who will be hoping the quantitative easing party continues and spurs a recovery in demand for gold.

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Motley Fool contributor Regan Pearson does not own shares in any companies mentioned in this article.

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