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Gold price injects heat into SA gold shares
Allan Seccombe
Posted: Thu, 03 Jan 2008

[miningmx.com] -- SOUTH AFRICAN gold shares took off like a scalded cat on Thursday as the price of the metal vaulted past levels last seen in 1980, reaching $865/oz in European trade.

“Gold has been pushed to record highs by oil up at $100 a barrel, a weaker outlook for the dollar and fears of a recession,” said Sasha Naryshkine at Vestact, a private client institution.

Violence in Nigeria at the oil town of Port Harcourt on 1 January in which 12 people were killed by militants is one of the reasons and fears of supply disruptions is one of the factors that have pushed oil into uncharted territory.

“The U.S. economy is showing no sign of improvement, even as the weaker dollar and higher oil add to inflation,'' Lin Yuhui, research manager at China International Futures Co. in Shenzhen, is quoted by Bloomberg as saying.

The South African gold share index turned in a star performance on Thursday, rising some six percent by midday trade South African time.

The major gold producers led the upward charge as the rand gold price surged to record highs of above R190,000 per kilogram.

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AngloGold Ashanti, Gold Fields and Harmony all gained around five percent.

Curiously, Wits Gold, which has touted itself as an option on the gold price and does not have producing assets, was untraded on the day. The company’s shares have run hard in the strong gold price environment.

The rand per kilogram gold price bodes well for earnings and could be a factor behind the positive sentiment driving up the gold index, said Mandla Mapondera, the gold analyst at Old Mutual Investment Group in Cape Town.

“This is very positive for earnings because margins are opening up. The rand gold price is benefiting from the rand not strengthening against the dollar despite the gold price going up,” Mapondera said.

The higher price, if sustained, allows gold companies to bring in expansion projects that would not have been feasible at lower prices.

“These prices are positive for the South African gold industry as long as they’re sustained and if the gold companies deliver on production. What’s happened in the past is that gold production hasn’t grown in spite of the gold price going up,” Mapondera said.

The platinum index also rose strongly, adding two percent as the price of the white metal reached fresh highs.