Keen interest in rate dulls gold’s shine

GOLD stocks came off the boil for the third straight week, tracking a gold price that slipped below the $1 200/oz mark for the first time since February.

The gold miners’ index is now 50% below its recent peak in August, although it is still positive on the year so far.

AngloGold Ashanti has dropped back from highs of R301.07 to R155.28 and Gold Fields from R88 to R44.98.

The gold price is labouring under a strong dollar that is drawing strength from expectations of higher interest rates in the US. Demand for gold as an asset class tends to suffer in a higherinterest-rate environment.

The decline in the gold price gathered momentum about two weeks ago after Donald Trump won the US presidential race, having promised to ramp up fiscal spending, which, analysts say, would accelerate inflation. That would trigger faster interest-rate increases from the Federal Reserve.

The world’s most influential central bank is widely expected to tighten its monetary policy next month after another round of upbeat data this week, including durable goods orders, which suggests the US economy is on a sound footing.

“Gold is looking quite bearish and very susceptible to a hawkish Fed outlook next month,” said Oanda senior market analyst Craig Erlam.

Diversified mining houses continued to punch above their weight, boosted by the rally in copper and iron ore prices, which have tracked Trump’s fiscal expansionary agenda.

BHP Billiton and Anglo American gained 7.5% and 13%, respectively.

Outside the resources market, Barloworld, Tiger Brands and TFG fared well in the broader industrial sector. Furniture retailer Lewis rebounded 17%, ending a five-week losing run.

S&P Global Ratings, which has South Africa’s foreign currency rating at one notch above sub-investment grade, will come under the spotlight on Friday, as will the oil cartel Opec, which meets in Vienna this week to decide on output.