Rand glitters as dollar dumps
Market uncertainty after Trump’s Wednesday press briefing
THE rand and South African gold shares strengthened yesterday and the dollar weakened as the market reacted to the uncertainty created after US president-elect Donald Trump’s press briefing on Wednesday.
Spot gold, which strengthens on a weaker dollar was up 0.5 percent at $1196.06 per ounce in morning trade, after touching a high of $1198.58, its best since November 23.
By midnight, the rand was at R13.5254 against the dollar from R13.8676 at 5pm on Wednesday, almost 2.5 percent stronger.
By 11.34am yesterday, the Johannesburg-listed gold sector rose 3.61 percent, its highest level since November 29, with AngloGold Ashanti rallying 4.34 percent, Gold Fields gaining 3.41 percent, Harmony Gold up 2.84 percent and Sibanye Gold up 2.16 percent.
Ricardo da Camara, a market analyst at ETM Analytics, said the market had priced in a lot of potential policies that the Trump administration might implement.
He said investors on Wednesday at Trump’s first news conference since his victory on November 8 wanted more detail on policies but he fell short of fresh details, which drove the dollar.
“The perceived weakness extended to 24 emerging markets, with not one this weaker against the dollar this morning, which is unusual.
“This ties into US policy expectations that the government will boost growth that may see the Federal Reserve raise rates more aggressively.
“This is negative for emerging markets and South Africa as it bolsters the dollar and US Treasury rates and sucks up liquidity from the US financial system,” said Da Camara.
Matshego Isaac, an economist at Nedbank, said markets were volatile and any news from the US tended to move them.
“Investors see gold as a safe haven. The rand in the short term will benefit from a higher gold price as the market perceives higher risk and turn to gold hedges. Trump coming in is creating a lot of uncertainty.
“We are likely to see markets coming under pressure as investors pull out of higher risk markets like South Africa and invest in the US. Trump is not familiar with workings of new economies and is focusing on the US.”
The dollar sank to a five-week low below 114 yen yesterday and was on course for its worst week since November, hit by a loss of confidence in the US reflation trade which has dominated markets since Trump’s election.
The greenback fell as low as 113.97 yen, its weakest since December 8, and down 1.2 percent on the day. The dollar index, which tracks the US currency against a basket of six major counterparts, fell another 0.8 percent to 100.98. It had risen to a oneweek high on Wednesday. The euro gained 0.6 percent to $1.0645 after skidding to a 14-year low of $1.0340 last week.