Why has the Northern Star share price fallen 10% in a month

The month of May hasn’t been great for Northern Star shareholders.

| More on:
A woman holds a gold bar in one hand and puts her other hand to her forehead with an apprehensive and concerned expression on her face after watching the Ramelius share price fall today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Northern Star shares are down 10% for the month despite lifting 2.87% to $8.97 each today
  • The price of gold has declined, causing the company's shares to lose ground
  • Yet two brokers remain optimistic on Northern Star shares regardless of the temporary headwinds

The Northern Star Resources Ltd (ASX: NST) share price has tumbled in the past month.

Since the start of May, the gold miner’s shares have dropped around 10%, making the company one of the worst performers across the sector.

By comparison, the share price of fellow miner Newcrest Mining Ltd (ASX: NCM) declined by 7% across the same timeframe.

At the time of writing, Northern Star shares are recovering some of their losses, up 2.87% to $8.97.

What’s happened to the Northern Star share price?

The deteriorating price of gold has weakened investor sentiment, sparking a selloff of Northern Star shares.

The precious yellow metal has failed to keep up in recent times despite the turmoil impacting global markets. During times of uncertainty and volatility, gold is traditionally seen as a safe haven for investors.

However, the spot price of gold has travelled lower to trade under US$1,860 per ounce. It was only for a brief moment in early May that the gold price neared the US$1,900 mark.

China is a key market for gold purchases, particularly for use in jewellery.

Previously, the Asian giant was under tough COVID-19 restrictions which led to stores being closed in major districts.

This severely weakened demand for gold as consumers’ spending habits were disrupted.

Low demand in key markets such as China or India can drag down the price of gold.

Jewellery accounts for the largest slice of global gold demand at around 50%. This is followed by central bank reserves at 25%, individuals at 15%, and industrial uses at 10%.

In addition, with interest rates lifting, this has also driven investors away from the yellow metal.

There is a correlation here as when interest rates are low, it reduces the opportunity cost of holding non-yielding bullion.

On the other hand, when interest rates rise, investors begin to shift from gold to bonds.

What do the brokers think?

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

Last week, UBS slashed its outlook on Northern Star shares by a marginal 0.8% to $11.70 per share. Based on the current share price, this implies an upside of 31% for investors.

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

On the other hand, Credit Suisse raised its outlook on the company’s shares by 4.5% to $11.50. Its analysts believe Northern Star shares still have some room to bounce higher.

Motley Fool contributor Aaron Teboneras has positions in 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 Scott Phillips.

More on Share Fallers

A woman sits on sofa pondering a question.
Energy Shares

Is the AGL share price in the buy zone following the company’s latest results?

Are AGL Energy shares worth a post-earnings look?

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why AGL, Fisher & Paykel, Inghams, and TPG shares are sinking today

These ASX shares are falling heavily on Friday...

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Energy Shares

APA share price falls as payroll errors leave $32m dint

The company will recognise a $32 million provision in its financial year 2022 earnings.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Blackmores, Codan, Lake Resources, and Xero shares are falling today

These ASX shares are falling on Thursday...

Read more »

A young girls clings in fright to a big red slide.
Materials Shares

Down 16% in 3 days: Why is the Lake Resources share price still sliding?

What's behind Lake shares dropping 16% in three days?

Read more »

A businessman slips and spills his coffee.
Share Fallers

Adore Beauty share price slips 12% following ASX speeding ticket

What went down with Adore Beauty on Wednesday -- other than its share price.

Read more »

A businessman carrying a briefcase looks at a square peg or block sinking into a round hole.
Energy Shares

Why is the Carnarvon share price cratering 18% on Wednesday?

The ASX energy share released an update on its Dorado development, located offshore in Western Australia.

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why CSL, Downer, Magellan, and PointsBet shares are falling today

These ASX shares are falling on Wednesday. Here's why...

Read more »