The shares of Newmont Corporation (NYSE: NEM) have declined by about 8% over the last week (five trading days), and remain down by about 13% over the last month. The sell-off comes as gold prices have declined steadily from over $1,980 per ounce in March to just about $1,700 currently, driven by rising U.S. interest rates and a strengthening dollar. Moreover, with inflation remaining high, the expectation is that the Federal Reserve will continue with its aggressive rate hikes, and this is likely making non-productive assets such as gold a bit less attractive to investors. This is impacting Newmont, given that the company derives a bulk of its revenue from gold (about 83% in Q1 2022) with the company estimating that every $100 increase in the gold price per ounce results in a $400 million rise in free cash flows. However, we think that things could look up for precious metals. Indicators point to a recession in the United States in the near term. Consumer confidence in the U.S. is also falling, as high inflation puts pressure on household budgets. Geopolitical uncertainties have been growing following Russia’s ongoing invasion of Ukraine. Trefis believes that these factors are likely to propel gold prices higher until global macroeconomic and geopolitical stability is attained.
However, now that NEM stock has seen a decline of about 13% over the last month, will it continue its downward trajectory in the near term, or is a rally imminent? Going by historical performance, there is a roughly equal chance of a rise or decline in NEM stock over the next month. Out of 195 instances in the last ten years that NEM stock saw a twenty-one-day decline of 13% or more, 98 of them resulted in NEM stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 98 out of 195, or about 50% chance of a rise in NEM stock over the coming month, implying a positive near-term outlook for the stock. See our analysis on Newmont Mining Stock Chance of A Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of Rise’ using last ten years data
- After moving -7.8% or more over five days, the stock rose in the next five days on 57% of the occasions.
- After moving -8.3% or more over ten days, the stock rose in the next ten days on 54% of the occasions
- After moving -13% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 50% of the occasions.
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- Why Has Newmont Stock Outperformed The Market?
- Here’s How The Recent Slide In Gold Prices Impacted Newmont Stock
- Rebound In Gold Prices – How’s Newmont Stock Performing?
This pattern suggests that FCX stock is not highly likely to see gains in the near term.
With inflation rising and the Fed raising interest rates, Newmont stock has fallen 10% this year. Can it drop more? See how low can Newmont stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||1%||-20%||70%|
|Trefis Multi-Strategy Portfolio||3%||-21%||216%|
 Month-to-date and year-to-date as of 7/16/2022
 Cumulative total returns since the end of 2016