There was some confusion this morning around the disproportionate drop in Newcrest stocks on open – down around ~3% with gold reasonably flat. It looks like it’s down to index rebalancing to the major Nth American gold indices
Quarterly Index changes to the major North American gold indices – GDXJ etc. – occur on the 15th day of the month prior to quarter end i.e. this Friday 15 June. The market is never wrong – so index desks/funds preparing for the changes this week. These changes are global hence impact gold equities in Australia, Canada, Brazil, South Africa etc. NCM and SBM look set for an index down weighting … probably courtesy of some new entrants coming into the respective Gold indices. More detail should come out shortly however NCM will likely be volatile for the next few days.
Newcrest Mining (NCM) Chart
Market Matters Take/Outlook
Heavyweight NCM has been the clear “dog” of the sector not only failing to rally with EVN and NST but actually managing to fall – over the last 12-months NCM is down -0.8% compared to EVN which is +32%. Unfortunately, NCM has been a serial market disappointment on the corporate level, at times rivalling QBE with its negative consistency!
However, as we regularly say successful investing is about looking forward, not back and NCM would become interesting below $19 in the coming months.
MM may consider accumulating NCM into weakness below $19 later in the year but EVN is our preferred play at current prices.
