The Newcrest Mining Limited (ASX: NCM) share price continues to surge higher today – the latest chapter in an incredible run since August 2018.
Although the ASX 200 (INDEXASX: XJO) and wider global sharemarkets are having a pretty rocky start to the week, the Newcrest price has made a fresh 7-year high of $28.76 this morning and is trading around $28.40 at the time of writing – up over 50% since last August.
Newcrest is a share that seems to do well when the market is storming ahead and even better when the market pulls back. So what is behind this surge? And can Newcrest shares climb higher?
What's behind Newcrest's share price gains
The gold price itself has seen a huge surge over the last 10 days. Gold spot prices were hovering around US$1,278 per ounce in the last week but this morning, gold is speeding towards the US$1,330 mark. Rapid price rises like this are uncommon and signal how jittery global markets really are. Additionally, even though the gold price in US dollars has seen these levels before, gold has never (ever) been this expensive in Australian dollars. When accounting for exchange rates, an ounce of gold will set you back around A$1,905, which is an unprecedented high.
Additionally, gold has always been viewed as a 'safe-haven' asset. With the China–US trade war getting worse by the day, the UK Prime Minister about to step down and tensions in the Middle East, you can see why nervous investors are bailing into gold and hard assets.
Newcrest has relatively low production costs, with a cost-base of $835 per ounce, so this price surge (together with the recent falls in the Australian dollar) would mean that Newcrest has likely never been so profitable.
Shares of other ASX gold miners are also hitting new highs. Northern Star Resources Ltd (ASX: NST) is swapping hands for over $10 a share for the first time ever, and Evolution Mining Ltd (ASX: EVN) has smashed through the $4 mark.
Foolish takeaway
If the gold price and our dollar stay at these levels, there may be some special dividends in the pipeline for Newcrest and other gold miners. Many investors believe there may be significant upside in the gold price yet, so its definitely a space to watch.
