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Gold shares rally as rand tanks after mid-term budget speech

Oct 30 2019 18:16
Paul Chakaduka, Purple Group

US stocks were flat ahead of this evenings FED rate decision as the S&P futures traded at 3033 points. The market is beginning to question the feasibility of the outcomes of the US-China trade deal talks announced last week. The market anticipates a rate cut tonight which could be the last one for the year, the devil will be in the details of Fed Chair Powell’s speech this evening. What would be key to note is the central banks aggression or lack thereof to cut interest rates. 

Asian markets traded softer on the day ahead of the US Fed Reserve interest rates decision later this evening.  The ASX200 the Nikkei, the CSI 300 and the Hang Seng eased 0.83%, 0.57%, 0.49% and 0.44% respectively.  

In today's MTBPS Minister Mboweni indicated that the government needs to continue its expenditure and increase revenues. THE MTBPS appears to not have satisfied the expectations of the market as the Rand softened and SA Inc shares came under pressure. 

It is very clear that if not addressed quickly the government will not be able to address this budget deficit. The Minister hinted that there could be restructuring of some of the SOE with a potential equity partner taking up a stake in South African Airways. Government has deployed funds to SARS and the NPA in a bid to bolster revenue collection and put breaks on corruption and tax evasion. 

Gains were posted by gold shares today as Sibanye Gold [JSE:SGL], DRD Gold [JSE:DRD], Gold Fields [JSE:GFI], Harmony Gold [JSE:HAR] and AngloGold Ashanti  [JSE:ANG] which gained 8.11%, 6.91%, 6.8%, 5.37% and 5.03% respectively.  

Losses were sustained by Nampak [JSE:NPK], Invicta Holdings [JSE:IVT] and Discovery which shed 5.69, 5.44% and 4.57% respectively. Most South African in shares were on the back foot on Wednesday as the rand weakened.  

The JSE All-Share index closed 0.29% firmer whilst the JSE Top-40 index gained 0.31%. The Financial index retreated 2.01% to close the day at 15835 points.  The Industrial and Resource indices rallied adding 0.92% and 1.11% respectively.

The Rand continued its downward spiral on Wednesday as the Finance Minister Tito Mboweni announced the MTBPS in parliament today.  Prior to the minister reading the MTBPS the local unit was trading at R14.65 against the greenback.  The local unit posted an intra-session low of R14.94/$ during the MTBPS.  At 17:00 the Rand was trading at R14.90 to the dollar, R165.56 to the Euro and R19.20 to the Great British Pound.

Brent crude slipped on Wednesday as worries about a possible delay in resolving the US-China trade war. US crude inventories came in higher than market expectations this week recording a build of 5.7 million barrels. Gold was generally firmer on the day to trade at $1492 at the time of writing up $3 from Tuesday’s levels.

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