Despite its recent rally, the Northern Star (ASX:NST) share price is still trading 30% lower than in 2020

The Northern Star Resources Ltd (ASX: NST) share price has surged this year, but is still down compared to 2020 levels.

Lately, the acceleration in the price of gold has boosted investor sentiment, causing a buy in the gold miner’s shares.

Since the beginning of 2022, the Northern Star share price has gained around 15%, making the stock one of the best performers across the sector. By comparison, the share price of fellow gold miner Newcrest Mining Ltd (ASX: NCM) increased by 9% across the same timeframe.

At the time of writing, Northern Star shares are swapping hands for $10.87, up 0.7%.

What’s happened to the Northern Star share price?

A common theme with gold mining companies, the Northern Star share price has been bought up following the improvement in gold prices.

Traditionally, ASX 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, geopolitical tensions between Russia and Ukraine have sparked a gold rush.

In the past month, the price of gold soared above the US$2,000 barrier, but has since fallen a touch under. Currently, gold is fetching US$1,994.45 an ounce.

At the start of the year, the precious metal was fetching US$1,829.05. This represents an increase of 9.17% in less than three months.

As such, the Northern Star share price has risen from $9.41 at the beginning of the year.

When looking at 2020, the price of gold spiked to more than 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 because of other macroenvironmental factors, such as the United States Federal Reserve’s intent to lift 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 signalled its next move is also up. Two rate hikes are tipped for 2022.

Rising interest rates drag down the price of precious metals and it appears investor sentiment is mixed for the moment.

What do the brokers think?

A number of brokers believe that the Northern Star share price is currently a bargain.

Last month, Macquarie slashed its outlook on Northern Star shares by 6.7% to $14 per share. Based on the current share price, this implies a potential upside of 29% for investors.

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

On the other hand, UBS lowered its outlook on the company’s shares by 3.6% to $10.80. Its analysts believe that they are fully valued for the moment.

The post Despite its recent rally, the Northern Star (ASX:NST) share price is still trading 30% lower than in 2020 appeared first on The Motley Fool Australia.

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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 recommended Macquarie Group Limited. 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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