The red-hot rally in gold prices driven by investor concern about the COVID-19 pandemic and its effects on the global economy has propelled South African gold stocks to record-breaking highs.
A Johannesburg index of producers has surged more than 90 percent this year, even as the broader South African equities benchmark remains in the red for this year.
The sector rose another 3.2 percent to an all-time high on Friday.
“Gold mining stocks are essentially leveraged plays on the gold price,” said Seleho Tsatsi, an analyst at Anchor Capital in Johannesburg. “Relatively small moves in the gold price result in big swings in profitability for the gold miners, because these businesses have big fixed-cost bases.”
Gold has advanced 19 percent this year, driving it within reach of the all-time high price of US$1,921 an ounce reached in September 2011.
Spot gold on Friday fell 0.3 percent to US$1,798 an ounce on the COMEX, up 0.8 percent for the week.
Vast amounts of global stimulus to shield economies from the ravages of COVID-19 have pushed real yields below zero and made bullion more attractive.
The rand price of gold has risen 44 percent, as the currency weakened against the US dollar, improving the profit margins for local producers.
Johannesburg’s five best-performing stocks are all from the sector, with DRDGold Ltd closing in on a fourfold gain for this year. Pan African Resources PLC has climbed 99 percent, Harmony Gold Mining Co 94 percent, Gold Fields Ltd 90 percent and AngloGold Ashanti Ltd 72 percent.
Their breakneck ascent has activated at least one warning that the gains might be overdone. The 14-day relative strength index for the gold stocks gauge is at 73, above the level of 70 that suggests to some technical analysts that the securities are overbought. Even so, there could be further upside.
“Really aggressive central bank action, not just from the US, but central banks around the world following the pandemic this year, is probably the biggest driver of gold prices at the moment,” Tsatsi said. “As long as that continues, which it appears as if it will in the short term, it should be supportive to gold prices.”
Separately, Zimbabwe’s biggest gold mines are being snapped up by Mauritius-based Sotic International Ltd as the price of bullion soars to the highest in more than eight years.
Landela Mining Ventures Ltd, which is controlled by Sotic, bought two of Zimbabwe’s gold mines this year.
The newcomer is targeting six more mines, including four idled state-owned operations, Sotic chief executive officer David Brown said.
That expanding mining portfolio has strategic importance as gold is the biggest source of dollars in a nation facing foreign-currency shortages.
“Gold is a commodity with potential positive impacts,” Brown said in a telephone interview from Johannesburg. “We want to grow the resource base to provide upside for both company and country.”
Additional reporting by staff writer
END TO SPECULATION: The hotel’s management contract has been extended, despite reports that it wanted to end its alliance with Hyatt Hotels over a deal with Riant Capital Singapore-based Hong Leong Hotel Development Ltd (豐隆大飯店股份) yesterday said it has extended a management contract to ensure the continued presence of the Grand Hyatt brand in Taipei, ending rumors that the two sides were parting ways. “We are pleased Hyatt is able to come to terms on the extension of the management contract of Grand Hyatt Taipei,” said Kwek Leng Beng (郭令明), executive chairman of City Developments Ltd (城市發展) and Millennium & Copthorne Hotels Ltd (千禧國敦酒店). Hong Leong Hotel Development is a subsidiary of Millennium, and both fall under the Hong Leong Group (豐隆集團). The Grand Hyatt Taipei (台北君悅大飯店), owned and built by
’WHITE BOX’: The open platform would give local firms access to Cisco’s cloud-based mobile network to develop 5G telecom equipment and tap into the global market The Ministry of Economic Affairs (MOEA) yesterday introduced a new 5G “open lab” in collaboration with US-based information technology and networking giant Cisco Systems Inc to address the rapidly growing “white box” 5G networking equipment market. The open lab will be a platform where Taiwanese manufacturers can access Cisco’s cloud-based mobile network to develop their own 5G telecom equipment, such as small-cell base stations, network switches, modems and Internet of things (IoT) devices, a ministry statement said. The open platform would allow Taiwanese manufacturers to tap into the lucrative 5G telecom equipment market, which was previously monopolized by Nokia Oyj, Ericsson AB
Nintendo Co is raising its target for Switch production to about 25 million units this fiscal year, people familiar with the matter said, as the ongoing COVID-19 pandemic keeps lifting demand and component shortages ease. The Kyoto, Japan-based company, which in April hiked orders to 22 million units by March next year, is asking partners to tack on another few million units, said the people, who did not want to be identified discussing internal goals. Assembly partners plan to work at maximum capacity through December. The new production target suggests that Nintendo is likely to outperform its Switch sales forecast of 19 million
‘BIG LOSS’: This year might see the last generation of Huawei’s Kirin chips, as their production would stop next month because they are made using US technology Chinese tech giant Huawei Technologies Co (華為) is running out of processor chips to make smartphones due to US sanctions and would be forced to stop production of its own most advanced chips, a company executive has said, in a sign of growing damage to Huawei’s business from US pressure. Huawei, one of the biggest producers of smartphones and network equipment, is at the center of US-Chinese tension over technology and security. Washington last year cut off Huawei’s access to US components and technology, and those penalties were tightened in May, when the White House barred vendors worldwide from using US