Is Newcrest Mining considered a defensive ASX share?

We check whether this ASX gold miner qualifies as a 'safe haven' investment.

| More on:
a woman wearing a sparkly strapless dress leans on a neat stack of six gold bars as she smiles and looks to the side as though she is very happy and protective of her stash. She also has gold fingernails and gold glitter pieces affixed to her cheeks.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Key points

  • Gold and, by extension, gold miners are often touted as defensive investments by nature
  • Newcrest Mining is the ASX 200's largest gold miner
  • Two ASX investing experts have their say about Newcrest shares

Is Newcrest Mining Ltd (ASX: NCM) a defensive ASX share? Well, you wouldn't think so looking at today's share price movements. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is down a depressing 0.87% and back under 7,500 points in the ASX's first major selloff in weeks. But the Newcrest share price is down a nasty 3.12% today to $26.40 a share at the time of writing.

But one day of underperformance isn't a lot to go on.

Newcrest is an ASX 200 gold miner. On the one hand, a gold share can be considered inherently defensive for some for its connection to gold. Gold is still viewed by many investors as the ultimate 'safe haven' asset. It often experiences interest during times of economic or geopolitical hardship. We can even see this playing out in 2022. This year has brought some calamitous geopolitical events, none more so than the war in Ukraine.

Since the start of the year, the price of gold has risen from around US$1,832 an ounce to the US$1,922 we see today.

Since Newcrest mines and produces gold, and also owns vast reserves of gold ore, it arguably benefits from this reputation for defensiveness by extension. That is tempered by the fact that it, like all gold miners, is a leveraged play on the price of gold. Since it costs Newcrest a relatively fixed sum to extract and produce every ounce of gold it mines, Newcrest's profitability exponentially increases if the price of gold rises. Conversely, it exponentially falls if gold prices decrease.

Can Newcrest shares be a defensive ASX investment?

But let's see what an expert ASX investor is saying about Newcrest's defensiveness. James Rutledge of investment manager Perpetual Limited (ASX: PPT) recently sat down for a podcast with Livewire Markets. In this interview, he shared his views on Newcrest shares. Here's some of what he had to say:

Newcrest is a buy for us. So, typically when you see real rates move from negative to positive, gold would be a pretty challenging space to invest. But given the freezing of FX reserves from Russia, we think that'll cause central banks to really revisit their gold holdings and that should support the gold price. Newcrest is also very cheap relative to gold majors. It benefits from a higher copper price with its byproduct. And the market's concerned about production issues, but we think that's more than reflected in the price.

However, his fellow podcast participant, WaveStone Capital's Raaz Bhuyan, wasn't as bullish. Here's some of what Bhuyan said on Newcrest:

It's actually a sell for us. I agree with James – the geopolitics has really taken the gold price up, despite the fact that real rates are going up. We think the moment we get some clarity around the Ukraine conflict, given where real rates have moved, the gold price is probably going to be under the pump a little bit.

So two conflicting views on Newcrest there. As with any gold miner, the fate of this company rides or dies with the price of gold itself. So if you're keeping an eye on Newcrest for a defensive investment, make sure you consider all sides of the equation.

At the current Newcrest Mining share price, this ASX 200 gold miner has a market capitalisation of $23.56 billion.

Motley Fool contributor Sebastian Bowen owns Newcrest Mining 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 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 Bruce Jackson.

More on Gold

gold blocks with the word gold encrypted
Gold

Could the gold price reach a new all-time high this week?

Is it on the cusp of a new all-time high?

Read more »

A man sitting at his desktop computer leans forward onto his elbows and yawns while he rubs his eyes as though he is very tired.
Gold

Why is this ASX gold stock crashing 14% today?

Why are investors rushing to the exits? Let's find out.

Read more »

A group of three miners in hard hats and high visibility vests confer at a rocky mining site.
Broker Notes

Up 66% in a year, just how much more upside does Macquarie tip for Perseus Mining shares?

Just how much higher might Perseus Mining shares soar? Here’s what Macquarie had to say about the ASX 200 gold…

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Share Gainers

2 ASX All Ords stocks that would already have more than doubled your money this year

These ASX All Ords stocks have gained 126% and 145% year to date. But how?

Read more »

A woman holds a gold bar in one hand and puts her other hand to her forehead with an apprehensive and concerned expression on her face after watching the Ramelius share price fall today
Gold

Guess which ASX 200 gold stock is sinking 7% on five-year guidance update

Let's see what this gold miner has announced this morning.

Read more »

A man analyses stockmarket graph on his computer.
Gold

Up 132% in a year, why is the Evolution Mining share price gaining again today?

Investors are piling into Evolution Mining shares on Friday. But why?

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Gold

ASX 300 gold stock crashes 8% on guidance update

This gold miner is having a tough session on Friday. But why?

Read more »

View of a mine site.
Gold

Up 70% in a year, why this fund manager is calling time on this soaring ASX 200 gold stock

A leading investment expert foresees headwinds for this surging ASX 200 gold miner.

Read more »