The Newcrest Mining Ltd (ASX: NCM) share price was asking $38.62 back in August 2019. That's a rather sad statistic, considering this ASX 200 gold miner closed at $25.89 a share yesterday evening. Particularly so for this writer, who owns Newcrest shares.
Yes, I have weathered a 33% or so loss on my Newcrest shares since that fateful day. Sure, it's not all bad news. For one, Newcrest shares are up a healthy 24.2% year to date in 2023 so far. They are also up an even more vigorous 64.3% since the lows we saw in September last year.
These collective journeys can be viewed below:
But let's focus on that near-four-year loss of 34%. Why have I tolerated such a laggard performer in my ASX share portfolio?
Why am I holding firm on my Newcrest shares?
Well, there are two reasons why. The first is that Newcrest plays a very specific role in my overall portfolio. It is not one of my core holdings, far from it. But I believe it does give my portfolio some insurance.
Gold is the classic safe haven asset. It remains one of the only commodities that humans have assigned intrinsic value to over thousands of years. It is also one of only two metals that have consistently been used as money throughout history (the other being silver).
Even today, gold is held by almost every advanced economy's central bank (including our own Reserve Bank), despite the fact that the world moved off the gold standard decades ago.
Now I don't expect the world to enter another depression any time soon. But just last month, we were all talking about the possibility of the United States defaulting on its sovereign debt.
If there is some catastrophic global event, it's likely that gold will be one of the better-performing assets to own. It proved as such during the global financial crisis. If the US did default last month, I would bet my house that gold would be a lot higher today than it currently is. After all, there is a reason that central banks still own gold.
Price is what you pay, value is what you get
Newcrest is a company that estimates it has 120 million ounces of gold in its mine's reserves (measured and indicated). So I'm happy to own a piece of this company that owns so much gold. I hope that Newcrest never becomes the best-performing site in my portfolio. But if there is a major global crisis, I think it will be.
That brings me to my second reason. The current price of gold is US$1,940 per ounce. If Newcrest does have 120 million ounces left in its mines, then it is sitting on a pile of gold worth US$232.8 billion ($341.08 billion). Yet its current market capitalisation is just $23.15 billion. So I don't give a rat's hat what the market says this company is worth. I know that I own a piece of that $340 billion pile of gold, and I'm happy that I paid what I did for it.
So that's why I'm holding firm on my Newcrest Mining shares. Some may call me crazy, but this company helps me sleep better at night.
