Gold soars amid US-North Korea war talk
Weaker rand and Trump’s North Korea tweets help push up index
Gold shares were sharply higher on the JSE on Thursday, outperforming all sectors, as persistent geopolitical tension and the weaker rand trend supported gold miners, which had been lagging the all share in 2017.
The gold index closed 6.18% higher at 1,369.32 points. The rand weakened to R13.53 to the dollar on Wednesday after President Jacob Zuma survived a parliamentary vote of no confidence by a narrow margin.
The currency firmed to R13.3490 on Thursday.
Global jitters on a possible showdown between President Donald Trump and North Korea saw the spot gold price jump to $1,287.77/oz on Thursday, the best in two months.
Trump warned this week that any threat to the US from North Korea would be met with "fire and fury". North Korea’s Kim Jong-un responded by threatening a strike on Guam.
"Gold and the Japanese yen have shown signs of safe-haven buying from investors," said FXTM analyst Jameel Ahmad.
Standard safe-haven instruments were still being preferred, with the yen well bid against its peers and gold a little higher after seeing strong gains on Wednesday, while equities were getting no love, said Oanda analyst Craig Erlam.
Spot gold has risen 11.58% so far in 2017, but the JSE’s gold index is flat, mainly on the rand, which has gained 2.9% so far against the dollar. The all share is up 9.96%.
It has been a case of stock-picking for gold shares in 2017, with Gold Fields up 25.8%. But other gold stocks have done badly, led by DRD Gold losing 39.2%, Sibanye 24.5% and Harmony 24.7%. AngloGold Ashanti is down 14.3%.
The star performer of the day was AngloGold Ashanti, whose share price jumped 7.37% to R130.76. Harmony was up 6.27% to R23.73 and DRD Gold gained 6.38%, to R4.50.
Mining production data released on Thursday pointed to further contraction in the gold sector. Overall mining production declined by an annual 0.8% in June. Gold was one of the main drivers of the negative picture, falling an annual -3.6%.
The gold index is characterised by wild swings, losing 55% in 2013, gaining 12% in 2014 and losing 7.6% in 2015. It recovered 28.8% in 2016.
Platinum and selected mining stocks cashed in on the higher oil price. Brent crude climbed 1.3%, to $53.48/oz in late afternoon trade before turning flat. The global mining stocks lost some value on the comeback in the rand.
GDP growth in China remains crucial to commodities. Iron ore has made a comeback after a dip in February, with Chinese growth concern seeming to be overblown. Global economic expansion and relatively healthy demand from China could provide further support to mining stocks.
"Chinese demand growth should slow only gradually as the country rebalanced its economy towards consumption," said BlackRock analysts.
The iron-ore price has climbed 36% since mid-June and copper 16% to a two-year high in May. Platinum rose 7.5% in July. Although Anglo American and BHP have rebounded since June, the two have not yet surpassed January’s highs.