Gold stock bullish after North Korea tests nuke

By Dineo Faku Time of article published Sep 5, 2017

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JOHANNESBURG - Gold stocks surged on the JSE yesterday (Monday) driven by a stronger gold price in the wake of fears that North Korea may launch further missile tests.

The bullion jumped 1% to $1 338.08 an ounce after earlier touching its strongest level since late September at $1 339.47 after North Korea’s said on Sunday it had conducted a test of a hydrogen bomb. The test which reportedly led to an explosion that created a 6.3 tremor drove jittery investors to buy safe haven assets .

Seleho Tsatsi, an investment researcher at Anchor Capital, said yesterday that gold was vulnerable to geopolitical tensions. “All of the gold miners are highly levered to the gold price, so any positive move in the gold price should see a greater than one-for-one increase in spot earnings, with share prices likely to follow suit,” Tsatsi said.

DRDGold, which focuses on processing tailings dams in Johannesburg through its subsidiaries Ergo and Crown Mining, at R5.08 a share at noon after climbing 9.25 % and closed 11.18 % firmer at R5.17 a share.

IMAYINI iHarmony Gold Kusasalethu eCarletonville. 
Photo: Supplied
DRD is scheduled to release its financial results for the year to June 2017 today (Tuesday). AngloGold Ashanti, the world’s third biggest gold producer, firmed 5.05 % to R137.33 a share before closing 5.24% higher at R137.58 a share.

Harmony Gold, where five mineworkers died in a seismic event two weeks ago, firmed 4.31 % to trade at R27.36 a share and closed 6.37 higher at R27.90 a share.
Sibanye Gold, South Africa’s biggest gold producer was 3.13 % higher at R21.10 a share to close 2.98 % lower at R21.07 a share.

Gold Fields, which operates the mechanised South Deep mine, traded 4.67 % higher to R59.35 a share and closed at 4.80 percent stronger at R59.42 a share. The strengthening of the gold price comes as local gold mining houses are under strain.

“There have been a few difficult updates coming out of the sector recently. The rand strength isn’t helpful, but investors may be more focused on what the US dollar gold price does,” Tsatsi said. Sibanye swung to a R4.8 billion loss for the six months ended June compared from R88 million profit in the same period last year owing to non-recurring items including a R1.1 bn provision for a class action suit by mine workers who contracted silicosis and impaired R2.8-bn impairment relating to the cessation of its loss making Cooke and Beatrix West mines.

Mine workers walk past the pit head at Sibanye Gold’s Masimthembe shaft in Westonaria. Picture: Reuters
While AngloGold Ashanti, reported a post-tax loss of $165m in the half year to June compared with a $61m profit a year earlier and an $80m profit and paid no dividend.
Both AngloGold Ashanti and Sibanye announced plans to close loss making mines. Tsatsi said it was difficult to forecast the gold price. “Two important factors to keep an eye on are the geopolitical tensions stemming from North Korea and the level of interest rates globally, particularly in the U.S. Any slow-down in the U.S. Fed’s prospective rate-hike cycle should be supportive of gold,”he said.

The rand steadied against the dollar early on yesterday (Monday) to R12.935 to the US dollar, compared to its close of R12.95 to the US dollar on Friday ahead second quarter Gross Domestic Product (GDP) figures which are scheduled to be released today (Tuesday). Economists expect the figures would show South Africa’s economy expanded in the three months through June, ending its second recession in less than a decade.


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