How Did Gold Prices Pull The String Of Newcrest Mining On Charts?

How Did Gold Prices Pull The String Of Newcrest Mining On Charts?

Gold prices are trading higher, with COMEX gold futures recovered from the level of $1292.50 (Day’s low on 14th March) to the level of $1306.70 (Day’s high on 18th March). The COMEX gold prices today managed to cross the previous day’s high to mark a high of $1307.65 (during the time of writing this report on 19th March 2019, 04:20 GMT). The gold prices are currently hovering at around $1305, well above the market psychological level of $1300.

The array of factors which are supporting the gold prices are the concern of delay in Brexit solution till the deadline of 29th March, falling dollar prices, falling market discount rate or Yield-to-Maturity in fixed income market, rising bond prices and a lot more.

In the presence of such events in the global market, the gold prices are finding short-term support around $1290. The market participants are waiting for the smoke to shun away over the U.S. Federal stance on the interest rate for the coming quarters and economic data to unveil the outlook of the global economy to reckon the direction of gold prices further.

However, gold miners are relatively enjoying as compared to short sellers in the market as gold prices are still high enough to give these miners a higher realized price as compared to the realized prices these miners were getting at the second half of the previous year 2018. The higher realized prices led these miners to receive high sales proceeds from the commodity, which in turn provides strength to their balance sheet.

With gold prices moving sharply from the second half of 2018, it has supported the prices of gold miners on Australian Stock Exchange as well.

Once such miner, where rising gold prices has supported the prices of the miner apart from financial performance, business model, exploration programmes, project and production of the miner, was the Newcrest Mining Limited (ASX: NCM). Following the observation on the charts, it can be concluded that the gold prices and Newcrest prices have established a positive correlation with each other.

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Source: Thomson Reuters: NCM & XAU Monthly Chart

Source: Thomson Reuters: NCM & XAU Monthly Chart

Following the observation on the monthly chart, it can be noticed that there was a  drop in gold prices during the starting of the 3rd quarter of 2018 brought a significant drop in Newcrest prices as well. Both the assets dropped in August 2018. The drop in the prices of both the assets can be observed in the chart with a red downside arrow mark.

The uptrend in both the assets started in October 2018. The rise in gold prices along with various other factors which could have been discounted by the market, resulted in the rise of NCM. The uptrend in both the assets can be seen on the chart and is marked with a green upside arrow.

Gold miners such as NCM rode on the commodity bull rally which started from the second half of the year 2018. The charts confirm the positive correlation between these two assets. However, the high or low commodity prices cannot be considered as the only reason to judge a commodity associated company and other factors also play a role. Albeit, commodity prices do establish a significant relation to the market prices of these companies.


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