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Here’s why the Newcrest (ASX:NCM) share price is underperforming

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The Newcrest Mining Ltd (ASX: NCM) share price is having a fun day today. Newcrest shares are up 1.07% at the time of writing to $26.51 a share. But that doesn’t paper over the last few months. The Newcrest share price is down more than 17% over the past year, and almost 28% since early August.

On one hand, one might be able to explain this move by a commensurate fall in the price of gold. Price movements of a resources companies’ underlying commodity are normally what’s to blame for these kinds of moves.

And looking at the gold price, it has been in a downward spiral since August. That was when gold broke it’s all-time high and climbed over US$2,000 an ounce for the first time. Since then, gold has retreated somewhat and is currently buying roughly US$1,840 an ounce today (although the effect has been mollified here in Australia somewhat by our rising dollar).

The simple fact is that demand for ‘safe-haven’ assets like gold is falling. Yes, gold is still at levels considered historically high. But the market is likely anticipating a more stable political environment in the United States come 20 January, as well as a successful coronavirus vaccine rollout over the year ahead. As such, it’s easy to see why investors have taken the gold price off the boil.

Newcrest still underperforms

But Newcrest has seemed to underperform many other ASX gold miners too. So between 6 August and today, Newcrest shares are down approximately 27.9%. Over the same period, Northern Star Resources Ltd (ASX: NST) is down 19%, Saracen Mineral Holdings Limited (ASX: SAR) is down 16.47% and Perseus Mining Limited (ASX: PRU) has lost 24.5%.

To be fair, a couple of gold miners have done worse than Newcrest. Gold Road Resources Ltd (ASX: GOR) is one, Regis Resources Limited (ASX: RRL) is another.

But Newcrest, the ASX’s largest gold digger, has certainly been taking investors’ money a little more than the average gold miner.

So why are investors not too enamoured with Newcrest?

It’s probably a legacy from the woes that this company faced last year. Back in January, Newcrest warned that production might have to be curtailed due to drought. Subsequently,  the company had to undertake a series of planned shutdowns across its network of mines. That timing was unfortunate, considering it coincided with the run-up in the gold price.

It may just be a lack of spotlight too. The ASX gold mining sector has been dominated by news of a blockbuster merger of late.

Northern Star Resources and Saracen are set to merge soon after shareholders of both companies’ overwhelmingly voted in favour of the marriage. If this goes ahead, the newly merged company would be a top 10 global gold miner and second largest on the ASX after Newcrest. Perhaps Newcrest simply looks boring in comparison right now.

Regardless, Newcrest shareholders are probably hoping that the next 6 months will be better than the last 6.

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Motley Fool contributor Sebastian Bowen owns shares of Newcrest Mining Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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