SA gold shares motor on fresh rand weakness

[miningmx.com] – RENEWED weakness of the South African rand against the dollar gave fresh impetus to the country’s listed gold shares on Monday – the third successive year gold producers started on a high note.

Harmony Gold, considered the most ‘leveraged’ to an increase in the rand denominated gold price, was nearly 12% higher in the first hour of trade on the Johannesburg Stock Exchange. Its local rival, Sibanye Gold, was similarly propelled, up 6.5%. Over the last 30 days these two shares are up 159% and 38% respectively.

A combination of rand weakness and an improved dollar gold price, up above $1,100/oz translates, into a rand gold price – the price received by South African gold companies – of R594,724 per kilogram.

This represents a 17% improvement in three months, and the highest level for at least five years. It is also the third year in succession that South African gold shares have opened the year on a high note. In the 2014 and 2015 New Year rallies, the JSE Gold Index surged about 60% and 40% respectively.

The dollar rose as much as 10.3% to R17.9950, a fresh record low for the rand on Monday which analysts told Reuters and Bloomberg was related to the market turmoil in China and a drop in US stocks deterred risk-taking.

The currency subsequently recovered some of those losses and was at R16.6832/$ at 10.57am local time in Singapore.

“The current market malaise may see the gold price firmer and the rand/dollar exchange rate 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 and Abhishek Tiwari, analysts for JP Morgan Cazenove.

“In this scenario, the South Africa gold sector’s New Year rally has further to run, in our view,” they added in a research note dated January 7.

Shares in Gold Fields and AngloGold Ashanti were 7.8% and 5.9% higher respectively at the time of writing.