GOLD BREAKS $1 800 BARRIER
New high for the first time since 2011
THE SPOT GOLD price yesterday breached the psychologically important level of $1 800 (R30 742) an ounce for the first time since 2011, underscoring the strong demand from investors amid Covid-19 pandemic concerns.
The jump in the bullion price, which closed at $1 823.40 an ounce, has been long coming after it gained 15 percent from about $1 580 in January as investors bet on further printing activity from central banks.
On Tuesday, gold closed $1 802.70 an ounce.
The metal has emerged as a safe haven for investors as Covid-19 threatens to plunge the global economy into a recession.
Bullion has also surged in response
at to the aggressive Covid-19 response by global central banks, including the US Federal Reserve, which announced limited quantitative easing programmes.
ActivTrades chief analyst Carlo Alberto de Casa said the surge was driven by demand from the investment sector, mostly for hedging in case of potential stocks correction in future.
“The increase seen in the investment demand is largely surpassing – for the time being – the slowdown seen in jewellery and industrial demand,” said De Casa, adding companies could have more cash to invest for improving structures and exploration.
Rene Hochreiter, a Noah Capital Markets analyst, said central banks’ printing money was a boost for gold.
“Printing $8 trillion is a 40 percent dilution of the US dollar, which in effect means a 40 percent rise in the gold price even before possible inflation and volatility all caused by global governments massive economic destruction due to over-reaction to Covid concerns,” said Hochreiter.
The rising prices and a weaker rand have seen companies listed on the JSE reaping benefits.
Gold stocks account for nearly 6 percent of the JSE All Share Index.
Harmony Gold chief executive Peter Steenkamp said the group was grateful for mining a commodity from which people continued to derive confidence in times of turmoil.
Steenkamp said Harmony would continue to mine as productively and cost-effectively as the global Covid-19 recovery allowed.
“The increased gold price is encouraging, and we will continue to mine with the safety and health of our employees as our priority,” said Steenkamp.
Gold stocks have outperformed the market, led by gold tailings company DRDGold, which has surged 255.56 percent in the year to date. The JSE gold index yesterday jumped 2.23 percent to 5 334.70 points.
DRDGold yesterday closed at R28.60 a share, 5.15 percent higher from the day before. Harmony Gold closed 10.88 percent higher at R94.59, AngloGold Ashanti rose 2.87 percent yesterday to close at R539.05. Pan African Resources inched 5.67 percent higher to R4.29, while Sibanye-Stillwater increased 5.25 percent to R41.28 from Tuesday’s close.
Seleho Tsatsi, an investment analyst at Anchor Capital, said the price environment had seen a resurgence in the share prices of JSE-listed gold stocks.
“It is going to be very good for their cash flows, which at the end of the day is what drives their share prices,” Tsatsi said.