Rand firms as gold keeps its shine

The rand firmed for a second day on Thursday as concerns over the rising number of Covid-19 cases in the US put pressure on the dollar, while gold remains at multiyear highs as investors seek refuge in the precious metal.

The rand has mostly maintained levels below R17/$ this week, having gained 1.5% since start of trade on Monday.

“Markets continue to seesaw, flipping between risk-on and risk-off at the blink of an eye. Gold eased from nine-year highs on Thursday, assisting emerging-market currencies to recover some ground,” said Peregrine Treasury Solutions executive director Bianca Botes.

The rand firmed against most major currencies on the day, reaching an intraday best of R16.7826/$, according to Infront data. At 7.03pm, it had strengthened 0.37% to R16.8753/$, 0.73% to R19.0551/€ and 0.35% to R21.2872/£. The euro had lost 0.26% to $1.1302.

Gold fell 0.45% to $1,800.62/oz and platinum 2.36% to $829.43. Brent crude lost 1.92% to $42.48 a barrel.

“Investors need to be careful with gold — it’s an asset that some investors are fanatical about, which is always a dangerous attribute. Gold is a psychological safe haven, and has little industrial application. This means that its price is driven by behaviour rather than by the fundamentals of supply and demand,” said Cannon Asset Managers CEO Adrian Saville.

The JSE closed weaker on the day, as global Covid-19 cases topped 12million, with more than 3-million of those in the US.

The JSE all share lost 0.15% to 55,787.9 points after reaching its best levels in more than four months earlier in the day, and the top 40 lost 0.4%. Gold miners fell 0.42%, resources 0.39% and industrials 0.13%. Banks gained 0.95%, financials 0.41% and platinum miners 0.19%. The all share is now just 2.27% lower in 2020.

“As always, there is the good and the bad news. Depending on where investors put more weight is what drives asset prices, and that is what leads to extreme highs and lows,” said FXTM chief market analyst Hussein Sayed.

“If investors truly believed that the economy was returning to prepandemic levels soon, gold wouldn’t be standing today at a nine-year high. So it’s evident that investors who are participating in this risk-on rally are also hedging their positions by adding safe havens as well,” said Sayed.