Gold shares on the JSE are shining on the back of bullish gold prices, which rallied to more than $2 300 (R43 692) per ounce yesterday, the highest selling point for the precious metal and safe haven.
Prices retreated towards the end of the day although analysts believe there is still momentum for a carry through.
Spot gold was down 0.3% at $2291.88 per ounce as of 4pm, after hitting a record high of $2304.09 earlier in the day, according to Reuters.
Gold shares on the JSE ended stronger yesterday on the back of firm bullion prices. AngloGold Ashanti’s shares yesterday ended the day 2.42% higher at R441,99; DRDGold shares rose 1.71% to R16.63, Harmony shares gained 2.16% to R166.30, while Gold Field shares rose 3.41% to R321.25.
According to Peter Little, a fund manager at Anchor Capital, South African gold miners rallied 24% on the JSE last month.
“Gold miners were a major boost to the JSE’s performance as shares of these miners tracked the price of the yellow metal higher, up 9% month on month, with the gold price regularly posting new all-time highs during the month,” he said yesterday.
Hugo Pienaar, a South African macro economist, who focuses on the mining sector, said the price of gold “continues to scale new all-time nominal highs” on global commodity markets.
“Although gold's contribution to the South African economy has declined significantly over the years, it still contributes about 15% to overall SA mining output,” explained Pienaar.
In 2023, South Africa raked in as much as R115 billion in gold export earnings. However, operationally, South African gold miners have been experiencing mixed fortunes, with Gold Fields saying its South Deep operation has been facing constraints while Harmony Gold is investing further into expanding its production.
A life of mine extension at Harmony Gold’s Mponeng mine in South Africa will add about 3 million ounces of mineral reserves to its portfolio. This will help ramp up production from the mine to an estimated 260 000 ounces per year at recovery grades of more than 9 grams per ton.
On Wednesday, gold prices extended a bullish run after Federal Reserve (Fed) chairman Jerome Powell kicked the can for rate cuts down the road, saying the Fed would lower rates sometime this year.
With South African, regional and international central banks shying away from robust rate cuts, including the US, gold has entrenched its status as a safe haven.
Cratos Asset Management also said the new highs touched by the price of gold had been sparked by revelations that global central banks, led by China and India, were adding to their reserves for the ninth consecutive month. Silver prices had also followed suit while Brent oil prices continued to advance after it was confirmed that OPEC+ would maintain current supply cuts until the end of June.
“Gold prices have officially crossed above $2300 for the first time in history. Since February 14th, gold is up an incredible $300 an ounce, or 15%, in less than two months. Even as three interest rate cuts have been removed from market forecasts, gold is pushing higher,” market watchers from the Kobeissi Newsletter wrote yesterday.
Geopolitical tensions and renewed inflation worries have also been primary drivers of a commodity price rally in recent weeks.
“Many investors are beginning to call for $3 000 plus gold prices as the run continues,” added the market watchers.
Saqib Iqbal, a financial analyst at Trading.Biz, had predicted that the gold price would range between $2 140 and $2 200 per ounce in April.
He attributed the surge in gold prices was attributed to economic factors in the US and market demand dynamics. He is of the view that gold prices may tip into volatility soon although he does not expect the precious metal to dip by more than 5%.
“I expect gold prices to remain volatile ahead of Federal Reserve's April meeting. Until then, I believe the price will swing between $2140 and $2200. A break on any side of this price range might result in an extra $50 movement in the course of the breakout," said Iqbal in an analysis note this week.
This came as gold demand was rising amid decreasing demand for other commodities.
Other market watchers said gold was being “driven higher by a demand imbalance” with central banks partly to blame as they largely remain net buyers of gold.
“Private investors make up the rest, which makes this rally unstable as their ability to maintain buying is unpredictable.”
BUSINESS REPORT