Down 20% so far in 2022, is the Newcrest share price a bargain buy or a falling knife?

The Newcrest Mining Ltd (ASX: NCM) share price was rangebound today and finished trading less than 1% in the green at $19.68.

Newcrest shares have curled up from 52-week lows on 27 July. They have begun to set new high points since, as seen in the chart below.

Is Newcrest a buy right now?

Those investors doing some bottom fishing in the market would have no doubt stumbled across Newcrest in their searches.

It has been punished in 2022 whilst other commodity giants – particularly in energy – have roared to multi-year highs.

However, Newcrest is a gold story, make no mistake about it. And with gold’s pressures of late, the ASX miner’s share price has followed suit.

If we extend the chart analysis out a bit further to August 2020, we can see the relationship between both on full display, with some variance in the distribution at various points.

Hence, to understand Newcrest’s share price we must therefore have an understanding of the gold price as well.

Gold prices spiked to a 1-month high on Monday, following a pullback in the US dollar and US Treasury yields. The yellow metal now trades at US$1,786 per troy ounce.

Investors are looking to upcoming US inflation data as a signal of where to position in the gold markets, Reuters reports.

“Any surprise softening in the U.S. inflation number could well be the catalyst for a tremendous surge in the gold price,” said Clifford Bennett of ACY Securities, cited by Reuters.

On last check, using the federal funds futures market, investors have priced an approximate 65% chance of another 75 basis point rate hike at the US Federal Reserve’s September meeting.

Hence, the question becomes if Newcrest presents compelling value, or if we’d be left “catching the falling knife” as the saying goes.

Meanwhile, brokers don’t appear to think there’s any knife in free fall in the first place. In fact, since July, there’s even been 1 broker rotate from a sell to a strong buy on Newcrest.

Now 8 out of 17 analysts covering the share reckon it’s a buy right now, up from 7 a month ago, according to Refinitiv Eikon data. The remaining coverage says Newcrest is a hold.

The consensus price target from this list is $25.58, suggesting around 30% return potential if the brokers have it correct.

Newcrest shares are down 22% in the red these past 12 months.

The post Down 20% so far in 2022, is the Newcrest share price a bargain buy or a falling knife? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• Why Appen, ASX, Credit Corp, and Newcrest shares are dropping today
• How are ASX 200 gold shares reacting to the RBA rate hike?
• The Newcrest share price tumbled 8% in July. What went wrong?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. 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.

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