Share

Gold in free fall

Johannesburg - The price of gold is plummeting to its lowest level in more than two years.

The gold spot price fell as much as 6% on Monday‚ hurting gold stocks which tumbled in excess of 10% to fresh multi-year lows before pulling back slightly‚ amid continued negative sentiment around the sector.

The precious metal extended its decline after plunging on Friday, when the US government reported that wholesale prices fell in March by the most in 10 months.

The gold index dropped more than 7% - for an 18% loss this month - to its lowest level since November 2008.

Independent analyst Ian Cruickshanks said the outlook for the gold price and gold stocks was gloomy. “There is less demand for gold as a hedge against inflation‚ which is likely to trend lower if brent crude dips and stays below $100 per barrel. The US‚ which is the biggest importer of oil‚ is moving towards self sufficiency‚” said Cruickshanks.

Brent Crude was about $101 per barrel‚ down about 3% on last week.

Gold spot fell to an intraday low of $1 385.45oz‚ its lowest point since February 2011.

Gold shares came under heaving selling pressure on the weaker spot price‚ with Harmony Gold Mining Company [JSE:HAR] dropping 8.79% to R45.65‚ the weakest level since May 2005‚ at 14:12. Gold Fields [JSE:GFI] lost 5.14% to R58.46 the level last seen in November 2008 and AngloGold Ashanti [JSE:ANG] shed 6.29% to R176.83.

“The disappointing economic data out of China has led to a renewal of the risk off sentiment we experienced late last week‚ impacting all sectors. Slower growth out of China compromises the global growth outlook as well as demand for SA commodities. The selloff in gold stocks is related to the massive correction in both dollar and rand gold prices‚” said Mohammed Nalla‚ head of strategic research at Nedbank Capital.

But Shaun Murison‚ market analyst at IG SA‚ believed a recovery in mining shares could be in sight in the short term.

“With intraday losses on some of our miners such as Goldfields reaching in excess of 10% it is hard to believe that in the near term moves are not being exaggerated. The correction we are seeing in the resource space looks like it could be nearing a point of capitulation as far sighted investors should start seeing significant value emerging in the larger cap or well diversified mining space‚” Murison said.

Investors tend to buy gold when they expect inflation to increase. Any indication that prices aren't rising prompts investors to sell gold.

A proposal that Cyprus sell some of its gold reserves to support its banks has also rattled the market. Traders worry that Spain, Italy and other weak European countries might do the same.


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders