Stronger dollar hammers gold, resources shares
THE STRENGTHENING of the US dollar yesterday, coupled with the much anticipated US Federal Reserve interest rate announcement scheduled for later today, weighed heavily on the gold price yesterday.
The expectation is that new Federal Reserve chairperson Jerome Powell would consider raising rates by 25 basis points following a pick-up in the US economy. However, this will likely be negative for gold as it will lead to a weaker gold price.
The stronger dollar yesterday hurt the equities market, with gold mining and resources taking a bashing.
The bullion closed 2.79 percent weaker at $1 243.69 an ounce and in rand terms lost 0.84 percent to trade at R16 933.07 an ounce, leading to a bloodbath among gold stocks on the JSE.
Sibanye Stillwater led the losses after shedding 5 percent to trade at R16.15 a share, followed by Harmony Gold, which shed 3.1 percent to close at R22.50, and Gold Fields, which declined 2.44 percent to R50.82, and AngloGold Ashanti, which fell 1.61 percent to close at R124.
The gold mining index was 2.79 percent lower at 1 270 points, and the resources index shed 0.48 percent to 35 828 points.
The gold price has been hovering at its lowest level in five months amid expectation of the Fed meeting.
Motital Oswal Investment Services research analyst Navneet Damani said gold was weighed down by the dollar strength against its major crosses and ahead of important day Federal Open Market Committee policy statement that began yesterday and ends today.
Damani said that market participants would be keeping an eye on the Fed’s economic projection report for signs of the central bank’s long-term intention.
“On the contrary, a dovish statement by the Fed chairperson could give some support to gold prices on lower levels. Recent economic numbers released from the US have been better-than-expected, thereby weighing on precious metal prices,” he said.
Platinum stocks were also hurt on the JSE.
The world’s biggest platinum producer, Anglo American Platinum, dropped 1.45 percent to R346.51 a share.
Impala Platinum, the world’s second-biggest platinum producer, closed 3.49 percent lower at R30.40 a share.
Northam Platinum was down 2.9 percent at R45.25 a share, while Royal Bafokeng Platinum was R26.50 a share, down 8.53 percent.
However, Lonmin, the world’s third-biggest platinum producer, strengthened 5.18 percent to R11.16.
The FTSE/JSE All Share Index shed 1.06 percent to 57 380
points, the Top 40 Index was 1.07 percent lower at 51 158 points.
The iron ore price weakened 3.72 percent to $66.15 (R901.14) a ton yesterday.
Equity research analyst at Noah Capital Markets, Luvuyo Booi, said iron ore had declined from a rally last week that saw the price touch $72 a ton.
Booi said the strong rally followed the release of iron ore imports data by General Customs of Administration, which showed that iron ore imports rose by 19 percent to 94.54 million tons last month.
“In an attempt to cub pollution, Chinese implement steel output cut during winter season.
“This generally results in tighter supplies and drives prices higher.
“Pollution is one of the main challenges faced by China, and the majority of the pollution in steel production is generated at sintering plant,” said Booi.