3 reasons Newcrest Mining shares are tanking

Shares in gold miner Newcrest Mining (ASX: NCM) have returned to their lowest level in months after optimism over the US Federal Reserve’s announcement to continue quantitative easing flat-lined.

Newcrest shares were down to $10.60 per share today after being as high as $13 in September. There are three big reasons driving the pressure and causing Newcrest shares to tank.

1. Gloomy analysts

Gold is out of favour with analysts who are gloomy on the metal’s short-term prospects. Morgan Stanley believes gold will continue to lose value heading into 2014 because of fears the US Federal Reserve will scale back its quantitative easing package.

Morgan Stanley Melbourne analyst Joel Crane is quoted by Bloomberg as saying “we recommend staying away from gold at this point in the cycle”, while Goldman Sachs head of commodities research Jeffrey Currie has reportedly called gold a “slam dunk” sell.

With such grim guidance from the big research companies it is unlikely much positive sentiment will shine through any time soon.

2. Boardroom calamity

After a disastrous financial result for FY13, several of Newcrest’s top brass are expected to will leave the company. Chairman Don Mercer has announced he will retire, while Chief Executive Greg Robinson is expected to leave the company in the second half of next year.

The change appears to have done little to install investor confidence in Newcrest’s leadership as the company remains under investigation by the Australian Securities and Exchange Commission over possible breach of continuous disclosure policy.

3. India import restrictions

One of the biggest buyers of gold, India, has introduced measures to restrict the importation of gold following a run on its local currency the Rupee which has sent people flocking to gold. The country has increased the tax on imported gold bullion three times this year according to Bloomberg.

Bachhraj Bamalwa, a director of All India Gems & Jewellery Trade Federation told the news site that in the second half of this year India’s gold imports will be slashed from 478 tonnes last year to just 150.

Foolish takeaway

Newcrest is not alone with its share price fall. Silver Lake Resources (ASX: SLR) and Kingsgate Consolidated (ASX: KCN) have also slumped back to June lows and with a gloomy outlook expected to play into 2014, Newcrest’s share price doesn’t look likely to see a big turnaround any time soon.

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Motley Fool contributor Regan Pearson does not own shares in any company mentioned.

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