Publications
Partners
Johannesburg - Gold shares on the JSE continued their strong recovery on Thursday morning, but major indices dropped further back and are now approaching support levels, which must be held to avoid further losses.
By noon, the gold index was a massive 10.15% stronger than the day before and the gold index is now fast approaching the level of 1 000 again, after trading as low as 757 at the beginning of last week.
Before Thursday’s rally, the gold index had already gained more than 13% over the past seven days. Technical analysts said further upside momentum can be expected.
The gold index was supported by a weaker dollar, which dropped to the lowest levels in three weeks after it became clear that US interest rates will probably not be hiked as early as next month as was originally expected.
Gold and platinum traded higher on Thursday and it also pulled the prices of platinum shares sharply higher. Even Lonmin’s share price increased after falling more than 19% on Wednesday.
Financial, industrial shares under pressure
Financial and industrial shares are still under pressure and the Al-Share index fell on Thursday morning to below 50 000 points. By noon, it was 1.28% lower on 49 498 points and the Top 40-index was 1.53% softer on 44 005 points.
The technical analysts of Imara SP Reid warned that the Top 40-index trades in a range where support is absolutely crucial if further technical damage is to be avoided. They said the current levels were foreseen, but the market reached it much quicker than originally expected. The Top 40-index is on the short term very oversold, but there is no evidence of a decisive “catalyst” to create a clear short-term technical improvement from current levels.
The financial index lost 2.25% in morning trade and the industrial index 2.05%. Both these indices are according to Imara SP Reid approaching the 200 day moving average. These shares need to hold their ground on high volume support to avoid a further deterioration in the near term technical picture.
Dollar loses edge
The dollar lost its edge after minutes from last month's monetary policy meeting of the Federal Reserve showed officials in broad agreement that the US economy was nearing the point where interest rates should move higher.
However, they also noted that lagging inflation and a weak global economy posed too big a risk to commit to "lift off", leading to some investors questioning the likelihood of a rate hike in September.
US Treasury yields fell and the 10-year US Treasuries yielded 2.122%, having declined from an eight-month high of 2.5% touched in June.
A weaker dollar was good for commodity prices and share prices responded immediately.
Gold and platinum higher
Amongst the gold shares, Anglogold Ashanti [JSE:ANG] gained 13.32% to R105.73 and Gold Fields [JSE:GFI] was 12.7% higher on R42.77. Sibanye [JSE:SGL] traded 11.89% stronger on R16.00 and Harmony [JSE:HAR] was 8.76% higher on R13.54.
Platinum shares were also sharply higher with Lonmin [JSE:LON] improving with 25.89% to R6.87. The share price lost 33.94% over the previous seven days and traded 19% lower on Wednesday.
Amongst the other platinum shares, Aquarius [JSE:AQP] traded 10.74% higher on R1.68, Implats [JSE:IMP] was 9.96% stronger on R48.48 and Amplats [JSE:AMS] was 8.74% higher on R319.89.
Resources shares were also supported by the weak rand. The resources index was at noon 3.41% higher, but Imara SP Reid warned that mounting evidence of weakness in the Chinese economy will continue to undermine support for commodities and resource shares.
Chinese concerns hammers market
Concern about the Chinese economy also hampered the rest of the market. Naspers [JSE:NPN] lost 2.30% to R1 636.10 and SAB Miller [JSE:SAB] lost 0.99% to R647.66.
Sasol [JSE:SOL] traded 2.98% weaker at R387.89 after the oil price plunged to the lowest level in more than six years in New York. A government report showed that US crude stockpiles had unexpectedly increased.
Brent traded below $47 and oil is now more than 30% lower than this year’s peak in June amid signs that producers are maintaining output even after a surplus pushed prices into a bear market.
Standard Bank [JSE:SBK] was one of the big losers in the financial sector, losing 2.33% to R146.78 and FirstRand [JSE:FSR] lost 2.25% to R50.93.
