The Newcrest Mining Limited (ASX: NCM) share price has edged 4.10% higher in 2020, but is the ASX gold share in the buy zone?
Why the Newcrest Mining share price has outperformed in 2020
It’s been a reasonably good year for investors in ASX gold shares. The coronavirus pandemic has spooked investors and hurt the global economy. That means shares in Aussie gold miners like Newcrest have managed to outperform the S&P/ASX 200 Index (ASX: XJO).
The index is down nearly 13% this year despite climbing 1.10% higher yesterday. That means the Newcrest Mining share price has outperformed the ASX 200 benchmark by around 17%.
Those are some pretty handy numbers given the current market. As the global gold price continues to climb, so too does Newcrest’s value.
The Aussie gold miner now boasts a $25.1 billion market capitalisation. That means it is well entrenched inside the ASX 50 and could be climbing higher.
But is now a good time to buy the ASX gold miner?
I personally think Newcrest shares are a touch overvalued right now. Investors are willing to pay a premium for safety, which has pushed Newcrest’s price-to-earnings (P/E) ratio to 28.45.
With a dividend yield of 1.05%, Newcrest does offer some portfolio income while other ASX shares are slashing distributions. However, I still think there is a bit of panic buying surrounding ASX gold shares right now.
The ASX Resources sector could well outperform in 2020. There is a strong technical environment despite some question marks over exports and our relationship with China.
However, overall commodity prices are high, which is good for the Aussie economy. If the Aussie gold miner can continue production and post good sales numbers in August, the Newcrest Mining share price may be a bargain at $31.09 per share.
Foolish takeaway
The Newcrest Mining share price has managed to edge higher and significantly outperform in 2020. I think whether or not that trend continues is the big question.
In my mind, where the Aussie dollar goes and how geopolitical tensions play out in the coming months will be key.
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More reading
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- Here are all the ASX 200 companies that announced capital raisings in May
- The big oil price recovery and bounce in ASX oil stocks are bringing out the bears
- 2 ASX 200 shares to watch on Tuesday
- Where to invest $5,000 into ASX 200 shares immediately
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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