Gold has pulled back from a near-term peak of USD1,920 per ounce on Sept. 5, 2011, to USD1,660 here in mid-October, providing a buying opportunity in the precious metal for investors who lack exposure to an asset class that deserves at least some place in any portfolio.

The recent pullback in the gold price has taken place in the context of a longer-term bull for the commodity complex overall, as investors have increasingly turned to assets backed by physical things as opposed to mere promises. This longstanding human desire has been stoked in recent years by the breakdown of the global financial sector and the erosion of investor portfolios.

The current case for gold is rooted in the monetary expansion in the developed world since the historic financial/credit/market crisis of late 2008, particularly in the US. Rather than allow the US financial system to implode in the wake of vanishing mortgage security values, the Federal Reserve and other global central banks have attempted to prop it up by injecting unprecedented amounts of credit into the system.

And now it appears authorities in Europe will do likewise to prevent a contagion being released from Greece. Negotiations continue on the size and scope of the package the 17 members of the European Union will put together to rescue Greece as well as the extent of the haircut debtholders will incur. But it appears a solution–or another kick of the can down the road–is in the offing.

In 2011 and going forward gold is a suitable hedge against European sovereign debt issues and general global uncertainty. Its historic status as a store of value touted to consumers of financial media on an unprecedented scale, gold has realistic potential for further gains based on rising demand over the long term.

Shares of gold mining companies provide one way of investing in the Midas metal. Melbourne-based Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY), Australia’s biggest gold producer and among the top 10 in the world based on market capitalization and production, offers an attractive value proposition.

This combination includes the general arguments in favor of owning gold at this particular moment in market history but also a regular and growing dividend, significant potential to boost output, and a record of increasing production in the past at low costs relative to its peers in the sector.

This latter point is crucial. There are many ways to rank gold producers, including by market capitalization (shares outstanding multiplied by the current market price), in terms of total ounces of production or according to overall reserves. But cash cost per ounce–how much money it costs a particular company to mine gold–might be the most important variable. Because the price of gold price is basically the same everywhere, companies with lower costs per ounce make more money.

And Newcrest consistently ranks among the lowest-cost producers of gold on the planet. That’s the chief reason we’re adding it to the Australian Edge Portfolio Aggressive Holdings.

Fiscal 2011 (ended Jun. 30) was a year of challenges for Newcrest, as it successfully integrated Lihir Gold and turned in good operational performance numbers despite significant weather-related challenges. Management reported strong reserve and resource growth as well as solid progress on development projects.

Gold production of 2.52 million ounces was 43 percent higher than a year ago, though copper production decreased from 86,816 tonnes to 75,631 tonnes, with lower production from Cadia Valley and Telfer.

Underlying profit–what management considers the best measure of the condition of the business–was AUD1.05 billion, up 36 percent from fiscal 2010 and a record for the company. Statutory profit increased by 63 percent from AUD557 million to AUD908 million. (“Statutory profit” is a metric required of Australian publicly listed companies that’s based on IFRS. It can include fair value adjustments for derivatives, one-off provisions, impairment losses, revaluation of liabilities and significant transactions.)

The average price for all metals increased sharply in US dollar terms, with gold averaging USD1,360 per ounce versus USD1,106 in 2010, copper USD3.88 per pound versus USD3.02. The corresponding impact on Australian dollar revenue was reduced somewhat due to strength of the aussie versus the US dollar during the fiscal year.

Increased cash flow from operations bolstered Newcrest’s solid financial position, even after funding a fiscal 2011 capital expenditure budget of AUD1.9 billion.  Debt-to-assets of 4.6 percent as of Jun. 30, cash of AUD185 million and undrawn bilateral debt facilities of USD600 million ensure Newcrest is adequately set up to fund further growth and ongoing exploration activities.

Significant progress was made on the latter front during fiscal 2011, as the Gosowong expansion was completed USD32 million under budget, construction of the Cadia East development and Lihir plant expansion progressed according to schedule and budget, and prefeasibility studies got underway on development alternatives at Wafi-Golpu, Namosi and O’Callaghans.

Exploration activities, focused on Asia-Pacific, generated a 9 percent increase in gold resources to 147.5 million ounces and 15 percent increase in copper resources to 19.91 million tonnes at approximately AUD4.50 per gold equivalent ounce.

Newcrest’s board of directors declared a final dividend of AUD0.20 for fiscal 2011, to be paid Oct. 21 to shareholders of record as of Sept. 30. The board also declared a special dividend of AUD0.20 per share, payable Dec. 16 to shareholders of record as of Nov. 25. The Australian Securities Exchange (ASX)-listed shares trade ex-dividend for this special dividend as of Nov. 21.

No one really knows where the price of gold will stop. A quick rise in interest rates could cause a spike past the USD2,500 mark so many observers predict. But our case for now is that, despite a run from under USD300 a decade ago to nearly USD1,700 now, gold can climb much further.

Its balance sheet leaves in good shape to make further acquisitions and fund growth as well as a modest dividend, Newcrest Mining–a new addition to the AE Portfolio Aggressive Holdings–is a buy under USD40 using the symbol NCMGF on the US over-the-counter (OTC) market or NCM on the Australian Securities Exchange (ASX).

Newcrest also trades in the US as a level I sponsored American Depositary Receipt (ADR) under the symbol NCMGY. NCMGY represents one share of the ASX-listed share; it’s a buy under USD40. The ADR is treated for all intents and purposes as a US stock for tax purposes.