Shares in SA’s biggest gold mining companies started the week on a firm footing as US interest rate cuts sent the metal’s price to a record high.
The price of gold firmed more than 1% on Monday, peaking at a record $3,728/oz during the day and extending a 42% price rally since the start of the year.
Harmony Gold was the best performer on the day, closing nearly 8% higher, while Gold Fields and AngloGold Ashanti, the JSE’s biggest gold miners, each posted gains just shy of 5%.
Overall, record gold prices and a recent run on platinum group metals (PGM) has nearly tripled the value of the JSE’s precious metals and mining index, adding more than 160% to its value since December.
The strong start to this week comes as economic and geopolitical uncertainty continues to drive gold demand to dizzying heights.
Central banks have been shoring up their reserves to protect against volatile currency markets as war wages on in the Middle East and Ukraine, while investors have turned to the safe-haven metal as a hedge against US tariffs and policy uncertainty.
In recent weeks, gold has been particularly sensitive to interest rate cuts, with a widely expected 25 basis point cut in the US sending bullion past the $3,700/oz mark last week.
A recent report by the World Gold Council suggests that gold's particular sensitivity to September's rate cut may point to concerns around stagflation in the US, with North American investors taking a more active role in gold markets in recent months.
The Council recorded $5.5bn of inflows into gold exchange traded funds (a popular vehicle to invest in the metal) in August, $4.1bn of which came from North American investors.
“A rise in inflation that is concurrent with a slowdown in economic activity and weakening labour markets signals we are increasingly flirting with a stagflationary environment,” the Council said earlier this month.
“Gold’s sensitivity to US real interest rates may increase as Western investors, particularly in the US, take a more active role amid softer demand from emerging markets,” it said.
With US Federal Reserve chair Jerome Powell signalling potential for at least two more rate cuts this year, further monetary easing is expected to fuel gold’s momentum further as the wave of post-Covid-19 inflation continues to peter out. Rate cuts encourage investors to shift out of interest-bearing assets tied to currency markets and into precious metals.
Gold’s particular sensitivity to the latest US rate cut has also seen major bankers and Wall Street analysts revising their gold forecasts upward in recent weeks.
Reuters reported earlier this month that Deutsche Bank had raised its 2026 price forecast from an average of $3,700/oz to $4,000/oz, partly citing the potential for a resumed US rate-cutting cycle.
The bank also flagged uncertainty surrounding the Federal Reserve’s independence and the composition of the Federal Open Market Committee's under US President Donald Trump as key drivers of economic uncertainty and, in turn, gold prices.
Trump has been characteristically unyielding in his call for the Reserve to slash interest rates in recent months, even threatening to fire Powell over the issue. Last week, the president increased his influence over the central bank when Trump adviser Stephen Miran was successfully appointed to the US Federal Reserve’s board of governors.
Goldman Sachs said in a recent note that gold’s price could reach more than $5,000/oz if Trump’s attack on Fed independence is successful — a situation which the bank says would trigger a flight from dollars and bonds.
According to the bank’s estimates, bullion’s price would soar to just shy of $5,000/oz if only 1% of the privately owned US treasury market flowed into gold.
Meanwhile, recent notes from JPMorgan and Bank of America analysts see potential for the metal to reach $4,000/oz by the end of this year.
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