Gold and platinum mining share prices saw another day of strong gains on the JSE yesterday bolstered by their perceived safe haven status in an uncertain geopolitical global environment, and US and Chinese economies that continue to surprise on the upside.
Yesterday morning around midday, Impala Platinum Holdings shares were 4.9% higher on the JSE, precious metals miner Sibanye-Stillwater shares were up 4.9%, Anglo American Platinum’s shares were up 3.7%, Northam Platinum Holdings shares were up 3.9% while African Rainbow Minerals shares were up 4.6%.
The increases followed substantial increases in the prices of their underlying commodities since the start of the year.
For instance, the price of gold rose 16.1% to $2 339.24 (R43222) per ounce yesterday from $2013.43 per ounce on December 2, 2023.
The spot price of platinum rose 6.6% over only a few days, from $930.80 per ounce on Friday, to $993 yesterday. The price of platinum group metal palladium rose to $1061.58 from 995.66 per ounce on Friday. Platinum group metal prices were, however, still below the $1138.70 reached in April last year.
Seleho Tsatsi, an investment manager at Anchor Capital, said platinum, palladium and rhodium generally contributed more than 80% of revenue for the platinum miners.
“We’ve recently seen a small recovery in platinum, palladium and rhodium, which are up 7%, 4% and 5% respectively over the past month. Year-to-date, the three metal prices are 1% lower, 3% lower and 7% higher, respectively.
The basket (platinum) price as a whole remains at a challenging level, but it is worth noting that declines in the basket price appear to have eased,” said Tsatsi.
Sequoia Capital Management consulting economist, Dr Chris Harmse, said three factors were driving precious metals prices at present, and as a result the share prices of mining companies on the JSE.
The first was the stronger than anticipated US economy. A more positive than expected US jobs report on Friday was a boost to commodity prices in that it bolstered expectations the US Fed might have to raise interest rates this year, which would then tilt investment towards safe havens such as precious metals.
This was in stark contrast to the start of 2024, when investor sentiment was generally anchored by US recession fears and expectations of US interest rate cuts. Instead of a soft landing to the US economy, it now appeared there would be “no landing,” said Harmse.
The second reason was the likelihood of higher metals demand driven by the stronger than expected Chinese economy, where GDP expectations were now at 5%, while at the start of the year it was 4%.
Harmse said the third factor driving precious metals prices was the traditional relationship between commodity prices and oil prices; oil prices had risen sharply by about $10 a barrel in the past few weeks due to global geopolitical uncertainties, notably in Europe and the Middle East.
Anchor investment analyst, Stephan Erasmus said that in 2024, investment demand, central bank purchases, and non-monetary demand would influence the gold price dynamics.
“Non-traditional investment avenues have driven the price upwards due to concerns over inflation and geopolitical tensions. This suggests a sustained interest in gold as a safe-haven asset,” he said.
He said central banks, especially the People's Bank of China, had significantly bolstered gold prices through purchases. The bank had its most significant annual increase in gold reserves since at least 1977, demonstrating the impact of official sector purchases.
“Despite the price rise, central banks' net purchases have continued, showing a bullish sentiment towards gold. The decline in China's residential property and stock market has increased non-monetary gold demand, contributing to the rise in gold prices.
“This demonstrates the numerous drivers of gold's value and appeal during times of uncertainty, affected by a range of global economic and political factors." said Erasmus.
BUSINESS REPORT