Dollar weakness gives the gold a solid shine

Gold regained its $2 000 (R34 847) an ounce level yesterday on continuing dollar weakness, helping JSE-listed bullion stocks to celebrate solid gains.

Yesterday bullion touched $2 013.16 an ounce, up 1.59 percent from the previous close of $1 981.35 an ounce, resulting in the JSE gold mining index flirting with the 6 112 point level after a 2.84 percent climb.

Gold stocks fared well with DRDGold, which has been the world’s best performing gold stock this year, jumping 4.08 percent to R27.03 a share in intraday trade yesterday. Later it closed at R26.01, up 0.15 percent.

Gold Fields climbed 3.42 percent to R230.94 a share in intraday trade (closing R222.58, down 0.32 percent), Sibanye-Stillwater was up 2 percent at R56.70 a share (closing at R54.35, down 2.23 percent), and Pan African Resources rose 3.83 percent to R5.97 a share (closing at R5.95, up 3.48 percent).

Harmony Gold Mining rose 4.4 percent to R113.83 a share (closing down 0.59 percent at R108.39), and AngloGold Ashanti was up 1.42 percent to R528.41 a share (closing down 1.55 percent at R512.95).

Gold has traditionally been a hedge in times of crisis and has jumped 30 percent since January on the weakening dollar and the fallout as a result of the Covid-19 pandemic.

The unprecedented large scale of US quantitative easing has bolstered portfolio inflows into emerging markets and lifted the gold price, while the US-China trade tensions were also expected to bode well for the precious metal.

Carlo Alberto De Casa, the chief analyst at ActivTrades, said gold was rebounding mostly due to the weakening dollar, but also due to technical reasons.

“Indeed, the price after the decline below $1 900 an ounce, found great support and started to recover. The main scenario remains supportive as Covid-19 cases are still growing and investors seem to be forecasting new stimulus from central banks,” said De Casa.

Gold has so far this year reached multiple-year highs, including touching $1 900 an ounce level in July.

Earlier this month gold hit $2 000 an ounce for the first time ever as investors scrambled for a safe haven amid a significant depreciation of the US dollar. However, it declined last week by more than $23 an ounce after a sharp sell-off before climbing again yesterday.

Gold received a boost last week when billionaire Warren Buffett bought a new stake in the world’s second-largest gold mining company, Barrick Gold, underscoring that the sector was becoming a target even for value investors who might typically have avoided the industry entirely.

The golden prices have helped restore the lustre of JSE-listed gold producers, which had been rusty over the long term. So far this year producers have reported monumental increases to their earnings, and have managed to pay off debt while rewarding shareholders with dividends.

Main Image; Great American Gold Company