JSE-listed gold stocks are off to a flying start this year as the
outlook for the metal price brightens.
Gold Fields has gained nearly 19% in 2023, raising market value by about R30bn to R189bn.
Gold Fields, along with AngloGold Ashanti, are part of the JSE’s top 40 index, which is tracked by institutional investors. AngloGold has risen nearly 14% since the start of the year and Harmony Gold and DRDGold are up more than 16%.
The spike in gold counters on the JSE underlines the positive mood that is reflected in other asset classes like bonds and cash, suggesting that investors think 2023 may turn out to be better than 2022, which was characterised by historic high inflation in developed markets in particular and subsequent rapid normalisation of interest rates, which has had a ripple effect on emerging markets such as SA.
Gold equities tend to track the underlying gold price,
which has risen 12% in the past three months in line with easing US inflation.
“I think the current environment has become much more positive for gold. The perception appears to be that the peak in bond yields and the dollar is now behind us and if anything, investors are becoming increasingly confident that terminal rates could be lower than feared and cuts could be on the cards later in the year,” Oanda market analyst Craig Erlam said.
“As always, that could be subject to change depending on the data and how other events unfold but right now, combined with the still troubling economic outlook, gold could stand to benefit in the months ahead.”
US inflation data for December is due on Thursday and is likely to have decelerated further to an annual rate of 6.5% year
on year from 7.1% in November, according to a Bloomberg
median estimate. Wednesday was a quiet day for the metal, with the price little changed at $1,875/oz in late trade.
The pick-up in the gold price and gold shares comes off the relatively low base of 2022 when stock markets and commodity prices fell markedly in the wake of Russia’s Ukraine invasion, which has contributed to the higher inflation environment, leading to aggressive policy rate increases by the central banks.
“US inflation appears to have peaked in June 2022, with the consumer price index providing a good reason to believe that we are now at the beginning of a downward trend,” Casey Delport, investment analyst of fixed Income at Anchor Capital, said in a note. “The downtrend is welcome news for markets and [the Fed], but it does not necessarily mean that we will get back to the central bank’s 2% annual inflation target any time soon. If historical trends are anything to go by, it could take up to two years for us to get there.”
Gold Fields pared gains in late trade to close 2% higher at R209.55 while Harmony Gold ended the day up 1% to R68.44.
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