Gold still glitters Mining shares, which have been under the cosh for some time, have rebounded to the delight of many die-hard investors. We look at a gold share that promises some excitement.
that commodity shares still enjoy the support of market players is borne out by the table of the strongest shares on the JSE. With the exception of Bluetel, the top 10 on the latest list are all mining shares.
It is noteworthy that the three gold shares at the top of the list are supported by a gold price that’s had a shift in gears. For the first time since January 1913 the 200day exponential moving average (EMA) of the dollar gold price has made a sharp upward move, which means that there is steady and firm buying pressure. The price has increased by just over 20% since reaching its low in December before a bit of a pullback occurred. The 200-day EMA will be tested as a support level at around $1 160-$1 170 an ounce. Should buyers enter then, or earlier, at say $1 200, then it will be confirmation that gold has entered a bull phase that could last for quite some time.
At the moment there is much speculation as to the message that the strengthening of the gold price could hold. There is speculation that perhaps it is suggesting that some or other crisis is on its way. Be that as it may, there is renewed interest in gold and in our gold shares, with especially Sibanye among the latter, where interesting things are happening.
The company’s CEO, the able and adventurous Neal Froneman, makes no bones about it that he wants to develop a variety of income streams for the group. He already has a firm foot in the door with platinum through Sibanye’s proposed takeover of Amplats’s mines in Rustenburg and those of Aquarius Platinum.
In mining circles it is said that one of his next targets will probably be Brian Gilbertson’s Pallinghurst.
Pallinghurst Group’s share price has been going nowhere since 2009, and Gilbertson has made it known that not only is he unhappy in this regard, but he cannot fathom why the market has rated Pallinghurst so poorly. It has interests in mining ventures, including gemstones, as well as the luxury jewellery brand Fabergé.
Coal, which currently finds itself in a depressing bear market, is also being looked at. Given the state of the market, Froneman may be able to acquire assets at bargain prices.
This means that Sibanye could cause considerable excitement over the next year or two, which will hopefully be supported by a firm gold price.
Among the weakest shares, Aveng still has the dubious honour of being second on the list, while other major companies such as PPC, MTN and Sun International are clearly not finding favour.
Quite a number of shares are showing interesting possibilities after they have broken out. Kap Industrial Holdings was notable when it rose from 611c to 675c at the end of last month. Coronation, one of the biggest disappointments of 2015, is also starting to show new life. At the time of writing it’s 62% up on its low in January this year.
PSG, which often dominated last year’s list of the strongest shares and then dropped by more than 40% from its 2015 high, has also improved markedly – with about 33% since reaching its low in January. Even Sasol, which is impacted by the moods of the oil market, looks interesting. At the moment it’s testing its 200-day EMA. Should it bounce back from this support level, it could be an indication that it is being accumulated by patient capital.