The Newcrest Mining Ltd (ASX: NCM) share price had a disappointing year caused by weakened market conditions.
The company holds the title of owning and operating some of Australia's largest gold and copper mines. While the company appears solid on paper, its shares have suffered as a result of macroenvironmental headwinds.
For the past 12 months, Newcrest shares lost around 5% in value. While this may not seem much, the broader S&P/ASX 200 Index (ASX: XJO) gained 13.5% over the same period.
At yesterday's market close, Newcrest shares closed 1.27% higher at $24.80 apiece. It's worth noting that its shares have been on a rebound in the last month, leaping by almost 10%.
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Why did the Newcrest share price sink?
A common theme with gold mining companies, the Newcrest share price has been dumped amid the deterioration of gold prices.
Traditionally, investors flock to the yellow metal as a safe-haven asset when there is uncertainty in the market. However, with the world moving past COVID-19, among renewed investor confidence across the US dollar and inflation numbers, gold has lost its value.
In the past year, the price of gold soared close to the US$2,000 barrier but has since fallen wayside. At current, one ounce of gold is fetching for US$1,817.64.
Compared to the start of the year, the precious metal had been fetching for US$1,951.34, down 7% from today's levels.
The United States Federal Reserve has indicated its intent to raise interest rates at least 3 times in 2022. This is because inflation had accelerated to 6.9% last year, the highest rate in nearly four decades, and unemployment levels being down.
Supply and demand imbalances due to COVID-19 along with the reopening of the economy have led inflation to spike.
As such, the Reserves Bank of Australia is expected to follow suit, with two rate hikes for the current 2022 year.
Rising interest rates drag down the price of precious metals, and it appears investors are bracing for the worst.
Is this a buying opportunity?
The good news for investors is that a number of brokers believe that the Newcrest share price is attractively valued.
Multinational investment bank, Macquarie lifted its 12-month price target by 13% to $34 for Newcrest shares. This implies an upside of around 37% based on the current share price.
In addition, Swiss investment firm, UBS lowered its assessment on Newcrest shares by 19% to $27. Its analysts clearly believe that there is still significant value in the gold mining company and that a recovery is inevitable. This represents a potential upside of 9% from where it trades today.
