The Northern Star Resources Ltd (ASX: NST) share price is rocketing higher on Friday afternoon. It appears investors have changed their sentiment on the company following a spike in gold prices last night.
At the time of writing, Northern Star shares are swapping hands for $9.48, up 5.92%.
Other fellow gold miners have also taken charge, with Newcrest Mining Ltd (ASX: NCM) shares fetching for $23.77, up 5.09%, and Evolution Mining Ltd (ASX: EVN) shares trading at $3.98 apiece, up 5.29%.
What’s driving Northern Star shares higher?
Investors are rallying up the gold mining company after the expensive metal rose overnight. Yesterday, the price of gold was hovering around US$1,780 an ounce. However, following the United States’ Federal Reserve tapering announcement, gold has currently shot up to US$1,802 an ounce.
The Federal Reserve advised that its stimulus program will be coming to an end soon as inflation begins to rise. As such, the central bank will be buying $60 billion of bonds each month starting next year in January. In contrast, this is about half of the amount it bought before November and $30 billion less than in December.
In addition, the Federal Reserve also signalled as many as three rate hikes in 2022 to limit the increase in inflation. Supply and demand imbalances due to COVID-19 along with the reopening of the economy have led inflation to spike.
In 2021, inflation is expected to jump by 5.3% compared to a previous forecast of 4.2%. For 2022, inflation is predicted to settle at a more reasonable level of 2.6% as a result of the Federal Reserve’s policy changes.
Recently, Northern Star managing director and CEO, Stuart Tonkin made an on-market transaction buying more of the company’s shares. What was considered as a bargain buy for $8.86 per share has now been confirmed.
Shareholders were also able to get in on the action as the Northern Star share price fell to $8.74 yesterday.
For those investors who followed in the CEO’s footsteps, the investment is already starting to pay off.
About the Northern Star share price
Over the last 12 months, the Northern Star share price is down by around 25%, with year-to-date the same.
On valuation grounds, Northern Star commands a market capitalisation of approximately $11.04 billion, with roughly 1.16 billion shares outstanding.