Australia

Newcrest chief says investors have 'rediscovered' gold amid COVID-19

The head of Australian gold miner Newcrest says the coronavirus pandemic and environment of extreme global uncertainty have caused investors to rediscover the importance of having gold in their portfolios, as the price of the yellow metal hovers around an all-time high.

Gold has proven to be one of this year's best-performing commodities, with prices up almost 30 per cent since the pandemic began, providing a boost to the profits of gold miners. The nation's largest gold miner, Newcrest, on Friday revealed its best profit result in eight years despite output slumping 12 per cent.

The traditional safe haven is flying high thanks to the coronavirus pandemic rattling world markets.

The traditional safe haven is flying high thanks to the coronavirus pandemic rattling world markets. Credit:AP

Chief executive Sandeep Biswas said concerns about the wider markets and the trillions of dollars of stimulus unleashed by world governments to support their battered economies were helping gold prices because investors were seeking out safe havens against inflation and uncertainty.

"The fundamentals are good for gold going forward in terms of the financial policies of various governments and the rediscovery among some investors about the importance of gold," he said.

"You've got generations of investors that may not understand gold's history, but they are learning about it very quickly. It's a fantastic investment in terms of hedging, particularly in bad times. It's good to have gold in your portfolio."

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The price of gold set a new peak last week, hitting $US2070 an ounce, passing the previous all-time high set in 2011. Despite having eased to around $US1950, forces including geopolitical tensions and second-wave COVID-19 outbreaks could still continue to underpin demand for gold as a haven.

"How high could it go? Good question," Mr Biswas said on a conference call on Friday. "If there's a major discontinuity in the world, or something else happens, it could shoot up."

In the past financial year, Newcrest achieved an average realised gold price of $US1530 an ounce – well below the current price – at an all-in sustaining cost of $US862 an ounce.

Shareholders would receive a US17.5¢ final dividend, taking the dividends for the year to US25¢, Newcrest said.

Matthew Moore, vice president at Moody's Investors Services, said Newcrest's low-cost position and production profile would enable the miner to continue generating a solid profit and cash flows at even lower gold prices.

"While we expect lower production levels and higher costs in fiscal 2021, elevated gold prices and Newcrest's conservative balance sheet will allow for still strong credit metrics," he said.

Commonwealth Bank director of mining commodities research, Vivek Dhar, on Friday said gold futures were gaining as the US dollar weakened and global growth concerns linked to COVID-19 boosted demand for the precious metal.

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