THE price of gold hit a fresh all-time high on Wednesday amid comments by the Federal Reserve it was getting closer to a possible rate cut – a development generally supportive of the yellow metal.
Fed Chair Jerome Powell said on Monday recent inflation readings “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.
“It seems like it’s evident that the Federal Reserve is going to cut rates in September and that, coupled with the concept of the de-dollarisation of how central banks have been buying more gold versus the US Treasury yields, are currently the catalyst that is driving gold to these highs” Alex Ebkarian, COO at Allegiance Gold told Reuters.
Gold hit a record peak of $2,487.40 in August Comex futures and is currently trading at a spot price of $2,474/oz.
On the JSE, the improved gold price also took the local price to a new record high of R1.45m per kilogram, and made for some interesting valuations on the Johannesburg Stock Exchange where shares in Harmony Gold notched up a new record high.
At about R200 per share Harmony is valued at R126.6bn. At that market capitalisation, it is valued double that of Sibanye-Stillwater which only two years ago was trading 70% higher owing to record platinum group metal prices.
“This hasn’t been a quick process just because of the gold price,” said Jared Coetzer, head of investors relations for Harmony. “It’s been a sequence of carefully thought-out steps which are now materialising in the share price,” he said.
The acquisition of AngloGold’s Moab Khotsong and Mponeng between 2018 and 2020 for $300m each had helped transform Harmony, he said.
“You can never discount that.
“From an operational side, all our metrics have improved which has been driven by higher grades coming through from Moab and Mponeng which have been phenomenal over the last 12 months. We are now not an outlier relative to the global majors. We are in now line with them. The gap between our costs and theirs has narrowed,” he said.
Harmony was less risky owing to improved safety, its planned diversification into copper mining, and the development of a surface gold business (formerly known as Mine Waste Solutions, also bought from AngloGold).
The big question is whether Harmony will treat shareholders to a bumper dividend. “We have a clear capital allocation framework. Our dividend policy is 20% of net cash and we need to keep in mind we are in high capex period.
“We will need to deploy our capital for period of time, but we are trying to balance returns which did at interim period with a record payment,” he said. Harmony is due to report its full year numbers on August 28.
