The central bank on Wednesday announced that there would be no interest rate cuts this year, pushing the bullion price higher and heightening the gold-buying frenzy that has been fuelled by the US-China trade war and geopolitical tensions in the Middle East.
The yellow metal reached $1382.30 (R20006) an ounce at 5pm yesterday, compared with the close of $1343.82 an ounce on Wednesday.
The JSE gold mining index climbed by almost 4.97percent to 1911 points in morning trade, with gold stocks leading the rally on the local bourse.
Harmony Gold Company was the biggest winner among its peers as it traded 7.77percent higher to close at R29.97 a share on the JSE, followed by AngloGold Ashanti, which closed 7.47percent higher at R241.99 a share. Sibanye-Stillwater closed 5.64percent higher at R15.35 a share, and Gold Fields jumped by 3.66percent to close at R76.48 a share.
Pan African Resources shares rose by 2.65percent to close at R1.94.
Gold Fields has been the best-performing gold share in the sector and has climbed 55.92percent in the past six months, as investors view gold as a tangible asset that enables them to own something they can hold.
Seleho Tsatsi, an investment analyst at Anchor Capital, said the gold price had been volatile over the past five years.
“Over the past 10 years, the price has jumped by 40percent from when it was just above $800 an ounce. The offsetting factor is the stronger rand,” said Tsatsi. “The expectation is that they (the Fed) will cut the interest rate in their next meeting. It will be good for gold,” said Tsatsi.
By 5pm yesterday the rand had strengthened 21.26cents to R14.3146 to the US dollar - its best level in more than a month.
The weaker rand means higher earnings for every kilogram of gold sold in dollars for local producers, whose profitability has been waning, owing to escalating costs.
The cost of electricity constitutes a significant component of total input costs in mining, with excessive increases in tariffs expected to have a further detrimental impact on the overall inflation profile of the sector.
Peter Schiff, the chief economist at Euro Pacific Capital, said the gold price had rallied $50 per ounce since Wednesday.
“Imagine how much higher gold would be had the Fed cut rates today. Imagine how much higher it would be if traders realised the Fed is going back to 0 and the fourth round of quantitative easing,” Schiff said.
South Africa’s gold-mining industry suffered a blow earlier this month when it was overtaken by Ghana to become Africa’s second-largest gold producer.