[miningmx.com] – SOUTH African gold shares were under the kosh again with companies with little to no offshore exposure targeted the most while analysts remained pessimistic about a short-term catalyst for the gold price.
Harmony Gold and Sibanye Gold were 9.7% and 8.3% down since the beginning of the week while Gold Fields and AngloGold Ashanti, which have operating mines in Australia and North American fared only slightly better.
“I can’t see a short-term catalyst for the gold price,” said David Davis, an analyst for SBG Securities. He suggested there would have to be a restructuring of supply in the long run but that would only assist in changing sentiment.
“Supply and demand fundamentals on their own don’t change the gold price,” he said. It’s thought sentiment was driving down shares as well as the price of gold.
The rand is close to recording its longest run of consecutive losses this year falling as much as 1.1% today to 9.3582 to the dollar and representing the weakest level since March 22. Over the last six trading days, the deterioration in the currency is some 3.5%.
This has a positive effect on costs on South African mines, and helps offset the fall in the dollar price of gold, but another analyst said South African gold shares “would fall anyway”.
“I think if the Rand blows out due to concern around “SA Inc”, the stocks will go down even if the move is theoretically helping their costs out,” an analyst said.
Rand weakness is associated with the re-introduction of labour instability in the last few weeks. Although the problems have been at Lonmin, and now Anglo American Platinum which may see labour on strike tomorrow, the realisation is that labour strife in the mining industry is endemic.
Commenting on the recently resolved strike at Lonmin, Investec Securities said: “The strike action shouldn’t have a material impact on output, but [it] does highlight the volatile situation at the platinum mines as we enter a period of wage negotiations”.
This is serving to compound the problems posed by the weak gold price.
“Technically, gold continues to look weak and could retest the lows of $1,322 it reached in April,” said the UK-based Standard Bank Commodities.
“Volumes for puts with strikes at $1,350 and $1,300 has increased in the past few days indicating a growing belief that the metal may trade towards $1,300,” it said.
