Gold is shining again after four months of consecutive decline
StatsSA said that gold production volumes had jumped 24.9 percent in December, lifting overall mining production by 1.8 percent year-on-year compared with -1percent in November 2019 and -2.1 percent in October.
Gold production was up from a revised 4.5percent in November, and -1.4percent in October as the gold price reached multi-year peaks on the trade wars between China and the US.
Investec economist Lara Hodes said safe-haven buying, amidst a global environment marred by trade and geopolitical uncertainty saw the gold price reaching more than $1520 an ounce at the end of last year.
Hodes said looking forward demand for the metal could continue. “Specifically, while China and US’s phase-one trade deal in January did support an increase in confidence, with risk-off sentiment receding somewhat, the subsequent outbreak of novel coronavirus has reignited fears of a global growth and trade fallout,” said Hodes.
In terms of South African gold mining, while the gold price had boosted miners who grappled with lower ore grades, they remained defenceless, along with the rest of the mining sector, in the face of continued electricity supply disruptions. “AngloGold Ashanti recently announced its exit from South Africa, selling its remaining domestic gold assets to Harmony. The mining sector is reliant on stable, affordable electricity supply to operate optimally,” said Hodes.
The mining industry welcomed the news by Mineral Resources and Energy Minister Gwede Mantashe earlier this month that the government would enable the industry to self-generate power to cushion the blow of Eskom’s supply constraints.
FNB senior economist Geoff Nolting said mining production was not out of the woods. Looking at 2019 as a whole, mining production had contracted by 1.3 percent compared to the previous year. Excluding May, which recorded a 0.3 percent growth, and July, with a 1.9 percent jump, the remaining 10 months all recorded negative year-on-year growth.
“Of concern is that the current production levels are 20 percent below the historical high reached in July 2004 for the period considered from 1980 onwards, as resources have become increasingly expensive to extract in South Africa,” said Nolting.