[miningmx.com] – THE improvement in the value of the South African gold index – the third consecutive January gold shares have out-performed the market – may be sustained throughout the year, said analysts.
“The current market malaise may see the gold price firmer and the rand/dollar slide further which could prove a double whammy for the rand gold price and for the South African gold miners in our view,” said Allan Cooke, an analyst for JP Morgan Cazenove.
It is the third year in a row, South African gold stocks have shot out of the blocks at the beginning of the year. “In this scenario, the South African gold sector’s New Year rally has further to run, in our view,” said Cooke in a report last week.
Citi analyst Johann Steyn believed a gold stocks run propelled by the weaker rand, could be sustained: “This time, weakness has been driven by broad concerns about emerging market growth, exacerbated by fears of an South African credit downgrade to sub-investment grade in 2016.
“This has seen the ZAR [rand] gold price increase 20% over a short period of time to R600,000 per kilogram – a level we believe can be sustained in 2016,” said Citi’s Steyn.
At the rand gold price of R550,000/kg which was achieved last week, the revenues of Sibanye Gold would be boosted by R4bn, said the gold firm’s head of corporate affairs, James Wellsted.
Emerging market currency weakness across the board was similarly helpful to AngloGold Ashanti, said the firm’s spokesman, Stewart Bailey. About two-thirds of AngloGold’s total production is produced from Argentina, Brazil and South Africa where the local currency slid 45%, 36% and 27% against the dollar last year respectively.
The gold index was down just over 1% today on a lower dollar gold price which had slipped again below $1,100/oz but this weakness may be down to index rebalancing in which up to 1.44 million ounces of gold will be sold for both the Bloomberg Commodity Index and the S&P GSCI, said HSBC in a report today.
The index rebalancing – involving the buying and selling of contracts – started on January 8 and would continue until tomorrow, January 14, the bank said. It added that it was not yet evident if gold had really attracted safe haven buying in the long-term.
“In addition to underlying investor scepticism, sales from index rebalancing activities
have likely also capped the market around the 100-day moving average around $1,108 and enabled the retreat sub-$1,100. Market is now focusing on the $1,080 key level and the 50-day moving average around $1,076,” it said.
