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Johannesburg - Gold producers escaped the worst of a two-day sell-off in South Africa as investors around the world switched to safer assets.
While the rand headed for its biggest decline against the dollar in a week and was the second-worst performer in emerging markets, SA's gold mining index jumped to the highest since February 2012 as investors sought havens from turmoil following the UK vote to leave the European Union.
AngloGold Ashanti [JSE:ANG] led gains as Johannesburg’s FTSE/JSE Africa Gold Mining Index advanced 6.4%. The price of bullion rose for a sixth day, climbing 1.2% to the highest since March 2014.
Edging closer
“The theme at this point seems to be an overwhelmingly risk-off one,” said Jana van Deventer, an analyst at ETM Analytics in Johannesburg.
“This has also bolstered demand for assets like the US dollar, developing market bonds and it’s seen gold rally quite impressively.”
The rand earlier fell as much as 1.3% to 14.9508 against the dollar, edging closer to the key 15 rand psychological level it traded at a week ago before the Brexit vote. By 14:37 in Johannesburg, the currency traded 0.8% lower at 14.8720. It weakened as much as 1.9% on Tuesday. The Johannesburg All Share Index dropped for a second day, led by Naspers [JSE:NPN], BHP Billiton [JSE:BIL] and MTN Group [JSE:MTN].
Yields on rand-denominated benchmark government bonds due December 2026 were little changed at 8.83% after rising 14 points on Tuesday.
“Investors are taking stock of the potential fall-out from Brexit and looking for investments that can protect wealth and whatever is viewed as least risky in this particularly uncertain environment,” Van Deventer said.
Strategic research
Foreign investors seeking higher yields have continued to pile into South African bonds and stocks, helping to cushion the rand. They were net buyers of R1.8bn ($121 million) of South African debt on Tuesday, in the longest streak since 2011. Stocks are experiencing the longest buying trend since 2002, according to data from the Johannesburg Stock Exchange.
“We cannot ignore the wave of money flowing into emerging markets as the global search for yield gathers steam in the wake of recent developments,” said Mohammed Nalla, head of strategic research at Nedbank earlier.
“While we remain fundamentally bearish on the rand from current levels, we have revised our year-end view significantly stronger to 15.30-15.50 rand per dollar, compared to our previous estimates of just above 16.00 rand.”
