Gold’s record-breaking run has cemented the shiny metal’s role as a safe-haven asset this year, buoying investor interest in Africa’s mining sector and setting the stage for more bumper profits among the JSE’s precious metal heavyweights.
The price of gold edged down 2% on Wednesday after posting its biggest drop since 2013 the day before, reflecting a flurry of profit-taking after prices touched a fresh record high of $4,379/oz at the end of last week.
The metal is now on track for its best year since 1979 after skyrocketing more than 50% in less than 10 months. It has outperformed local equities, with the all share index up about 30% over the same period. The surge has seen the largest gold miners listed in the JSE surge, now worth more than R1.5-trillion combined.
There is just no stopping gold’s run. A few months ago, even the most bullish analysts believed that a gold price of $4,000/oz would come to fruition only in 2026. Now, major banks such as Goldman Sachs and HSBC say it might reach $5,000/oz next year.
SA miners have relished the price run, which has added more than 140% to the value of the JSE precious metals & mining index this year as soaring prices allow miners to slash their debt and pursue new growth opportunities.
In a country of deep, ageing mines that are increasingly expensive to operate, elevated prices have given a lifeline to the domestic gold sector. Moreover, all SA gold producers have seen their share prices rise faster than the underlying metal this year thanks to operational leverage and improved efficiencies.
Gold Fields, now the JSE’s biggest gold miner, has been consolidating its portfolio after it reported surging profit for the six months to end-June, with headline earnings per share more than three times higher year on year.
This allowed the group to put an end to its protracted corporate tug-of-war with joint venture partner Gold Road by finally consolidating its ownership of the Gruyere mine, a Western Australian asset hailed for its low-cost, high-grade deposits, which Gold Fields has operated since mid-2019.
AngloGold Ashanti has capitalised on the elevated price by selling non-core assets and using the extra cash to bolster its portfolio with more sought-after mines. Most notable was the addition of Centamin, Egypt’s largest gold mine, for $2.48bn in November last year. Results for the first half showed that the company was ready for more such growth initiatives, as it reported a net debt of $92m, down 92% year on year.
Harmony Gold, the third-largest JSE-listed gold group, has also been on a buying spree in recent years, acquiring a number of offshore operations in an attempt to expand its reach.
Record gold prices have allowed the company to use offshore copper mines as a hedge against concentration risk and a downturn in gold prices, bolstering its investment case. After purchasing Papua New Guinea’s Hidden Valley in 2016 and Australia’s Eva Copper Project in 2022, the group doubled down on copper this year with its $1bn takeover of one of Australia’s highest-grade copper mines, CSA.
“Operationally, producers have improved efficiencies,” MP9 Asset Management chief investment officer Aheesh Singh told Business Day. “Companies like Harmony and DRDGold have reported higher grades and better cash conversion, contributing to higher profits alongside the high gold price, while volumes have remained relatively stable.”
Aside from economic and geopolitical uncertainty, gold tends to benefit from low interest rates, which make precious metals more attractive than bonds and dollar-denominated assets.
With markets already pricing in a 25 basis point cut in the US this week and another in December, gold’s record-breaking run is likely to stretch into next year.
“Continued central bank buying, potentially lower US interest rates and ongoing geopolitical tension all help support the metal’s demand as a safe haven,” said Singh.
“The rise has been fast, and some pullback wouldn’t be surprising. If inflation cools or the dollar strengthens, gold could lose some momentum, but overall, the near-term outlook remains positive.”
