Gold surges towards $2,000/oz taking JSE’s gold shares up 5% in Monday trade

JOHANNESBURG’S gold index surged over 5% in the first two hours of trade as the dollar gold price moved through $1,900/oz towards $2,000/oz as investors sought out the metal amid geopolitical and global health uncertainty.

The improvement in the dollar gold price consolidated the rand price of gold above R1m per kilogram, a record level it first achieved in March when Covid-19 was declared a pandemic. Gold was last at $1,935 per ounce, an increase of 1.8%.

“Strong gains are inevitable as we enter a period much like the post-GFC environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system,” with a weak dollar and negative real rates providing further impetus, said Bloomberg News citing Gavin Wendt, senior resource analyst at MineLife. Gold may consolidate before setting its sights on $2,000 and above in coming weeks, said Wendt.

Macquarie, an Australian bank, said the outlook for gold much depended on the global economy. Provided stimulus efforts continue and suppress rates, gold will continue to blossom even if there is subsequent growth.

It said in a June report that average spot forecasts would range between $1,713 and $1,725/oz with a quarterly average peak of $1,825 in the first quarter of next year. It also thinks an overshoot is possible as occurred in 2011/12. But it remains bullish.

“On a long-term basis, however, this outperformance does not look excessive,” it said of gold’s continued rally this year. “In 2011/12 prices peaked >$300/oz above our cross-asset ‘fair value’ estimate. Our point being that, in a bull market, we would expect gold to rally beyond fair value, as investors increase their exposure.”

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