Northern Star Share Price Down amid Wild Swings (ASX:NST)

The word ‘volatile’ is thrown around a lot, but just check out the wild swings for the Northern Star Resources Ltd [ASX:NST] share price.

With gaps everywhere, you can see a steep plunge starting from 6 March onwards, a big rally, another steep fall and another rally:

ASX NST Share Price - Northern Star Shares

Source: tradingview.com

We take a look at the big Aussie gold miner’s recent fortunes and the outlook for the gold price.

Click here to watch the full video interview between Rum Rebellion’s editor Greg Canavan and US economist and gold expert, Jim Rickards.

Northern Star share price sensitive to coronavirus complications

These were the key takeaways from the 26 March announcement where the company withdrew its earnings guidance:

  • Deferral of payment of 7.5-cent interim dividend to 27 October.
  • March quarter production expected to be 10­–15% lower.
  • No assurances about production in June quarter.
  • Restrictions on movement of workers and suppliers in WA and Alaska.

The company noted that, ‘as at March 25, 2020, the Company had total debt of A$700 million, comprising a A$400 million four-year term loan and a three-year A$300 million revolving credit facility. Cash on hand and bullion awaiting settlement stood at A$534 million.

With this nugget of info in hand, the wild price swings make a bit more sense.

Northern Star is one of the biggest Aussie gold stocks going, but it has a decent chunk of debt.

A number of gold stocks out there operate with no debt.

And with gold being seen as a hedge against a world infatuated with debt-funded growth and the central bank tinkering that goes with it, you can see how some gold investors may have been spooked by the withdrawal of earnings guidance.

Not blindly bullish on gold price, but watching the signals

You can see what the gold price in AUD terms has done the last three months:

ASX NST Share Price Chart

Source: tradingview.com

A steady rise, but more red creeping in of late. Momentum is wavering in the short-term you could say.

Calling short-term tops is tricky but doable if you can read the COVID-19 narrative, and the policy settings being rolled out across the globe.

The bigger question is, are we suddenly on the verge of a genuine bull run for equities and conversely a bear market for gold?

Is it out of steam for good?

Looking at the ASX 200 [XJO] and the S&P 500 [SPX] makes for slightly different reading.

In my eyes, [XJO] looks like it’s experiencing a far more muted recovery compared to [SPX], which could have implications for Aussie gold stocks down the track — more upside.

I’d also stress five interrelated things:

  1. Capital ratios for big banks could come down further across the board, globally.
  2. Awareness of this trend could spark further fear.
  3. We have yet to see the earnings of many big blue chips come through in the post-outbreak era.
  4. Central banks are on an asset buying spree akin to what Japan has done in the past.
  5. Central banks are on the verge of directly purchasing assets, as opposed to on the secondary market.

Check out some data from Bloomberg on what’s happened to central banks’ balance sheets of late:

 

The Federal Reserve Asset Purchasing Chart

Source: Bloomberg

So sure, call a top on the gold price for the next week. But I’d be shocked if it held up past then.

In other words, I think there is another leg down for shares (unsure as to how far) that you’d want to see before you can start to think about value buys outside of gold.

This isn’t blind cheerleading for gold, or the Northern Star share price for that matter, it’s more about a confluence of factors that are hard to ignore.

If you want to learn more about how editor Greg Canavan goes about picking winning gold stocks, get his free report here, where he runs you through his system.

Regards,

Lachlann Tierney

For The Rum Rebellion


Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 


The Rum Rebellion