Why has the Northern Star (ASX:NST) share price gained 23% in 2 months?

Investors would be relatively pleased with the performance of the gold miner’s shares…

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a man wearing a gold shirt smiles widely as he is engulfed in a shower of gold confetti falling from the sky. representing a new gold discovery by ASX mining share OzAurum Resources

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Key points

  • Northern Star shares have jumped 24% higher following bullish investor sentiment in gold
  • The yellow metal ticked upwards over the last few months due to the war between Russia and Ukraine
  • A couple of brokers recently weighed in on the Northern Star share price, both indicating a potential upside

The Northern Star Resources Ltd (ASX: NST) share price has surged in the past couple of months.

Since 4 February, Northern Star shares have gained around 23%, making it one of the best performers across the sector. For comparison, fellow miner Newcrest Mining Ltd (ASX: NCM)’s share price increased by 21% across the same time frame.

At the time of writing, Northern Star shares are swapping hands for $10.51, down 1.96%.

What’s happened to the Northern Star share price?

Lately, the acceleration in the price of gold has boosted investor sentiment, likely helping the Northern Star share price.

Traditionally, investors flock to the yellow metal as a safe-haven asset when there is uncertainty in the market.

While the world is slowly moving past COVID-19, the war between Russia and Ukraine has sparked a gold rush.

Earlier this month, the price of gold soared above the US$2,000 barrier but has since fallen a touch under. Currently, gold is fetching US$1,927 an ounce.

Back on 4 February, the precious metal was fetching around US$1,808. This represents an increase of about 7% over the two-month period.

As such, Northern Star shares have risen from $8.54 at the time.

It’s worth noting the price of gold spiked to an all-time high of US$2,072.90 on 7 August 2020. Northern Stars shares closed at $15.89 on the day.

However, you may be wondering why the company’s share price is nowhere near the level it was in 2020, given the price of gold is almost the same.

This is likely due to other macroenvironmental factors such as the United States Federal Reserve’s intent on lifting interest rates this year. The government body noted that inflation accelerated to 6.9%, the highest rate in nearly four decades.

Following along, the Reserve Bank of Australia is being tipped to hike rates twice in 2022.

Rising interest rates drag down the price of precious metals, and investors are apparently mixed for the moment.

What do the brokers think?

A number of brokers believe the Northern Star share price is trading at a bargain price.

Last month, Morgan Stanley slashed its outlook on Northern Star shares by 3% to $12.80 per share. Based on the current share price, this implies a potential upside of 22% for investors.

While the broker reduced its assessment on Northern Star, it still sees value in the gold miner.

On the other hand, UBS raised its outlook on the company’s shares by 11% to $12.00. Its analysts believe Northern Star shares still have some room to bounce higher.

Motley Fool contributor Aaron Teboneras owns Northern Star Resources Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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