Bullion producers have been hurt by high input costs, labour unrest, electricity supply constraints, and policy uncertainty. File Photo: IOL

JOHANNESBURG – South African-listed gold stocks surged yesterday, led by Harmony Gold as the global gold price leaped to a six-year high on the worsening trade war between China and the US.

The gold price reached $1 456.92 (R21 483.40) an ounce yesterday, 0.78 percent higher than Friday’s close of $1 440.03 an ounce, when US President Donald Trump said he was introducing further tariffs on China.

Harmony Gold led the rally after jumping 6.40 percent to R41.37 a share, Sibanye-Stillwater was 6.97 percent higher at R19.94 a share, Gold Fields was 8.14 percent higher at R85.55 a share and AngloGold Ashanti was 5.85 percent stronger at R299.01 a share.

The uncertainty also saw the gold mining index rising by 4.46 percent to 2 304 points yesterday.

Rene Hochreiter, an investment analyst at Noah Capital, said the strong gold price was good news for the gold sector, which has been bruised by numerous challenges.

“It means a lot more breathing space, especially at a weaker rand, which will see the companies in a far better position financially than they were in the past, Hochreiter said.
Bullion producers have been hurt by high input costs, labour unrest, electricity supply constraints, and policy uncertainty.  

Statistics South Africa said the previous gold sector’s input plunged 24.4 percent year on year in May from a 19.1 percent contraction in the previous month.

The Minerals Council has previously flagged that more than 60 percent of gold mines were marginal or loss-making. 

Trump last week surprised the market when he announced that he would slap 10 percent tariffs on $300 billion (R4.42 trillion) of Chinese imports, renewing trade tensions between the world’s two biggest economies. 

China retaliated by allowing the yuan to weaken, while simultaneously instructing state-owned companies to suspend purchases of US agricultural products, rattled markets.

The sudden escalation in the China-US trade war sent investors fleeing to the traditional safe havens, such as  the yen, bonds and gold.

Seleho Tsatsi an investment analyst at Anchor Capital, said that the renminbi (yuan) had declined past RMB 7 to the US dollar for the first time in just over a decade.

There had also been quite a bit of focus on the protests and disruption going on in Hong Kong. 

“Markets have sold off in response today. Gold, which is obviously viewed as a safe haven, has seen a bit of a rally in response. 

“The sell-off in the rand has driven the gold price too close to R700 000 a kilogram,” Tsatsi said.

The World Gold Council said in May that it believed the factors underpinning exchange-traded funds inflows and central bank buying, including looser monetary policy and geopolitical uncertainty, would continue. “Consumer demand, however, may be a bit soft as people adapt to the higher price level,” the council said.

Statistics South Africa this week is expected to release output data for the mining and manufacturing sectors which contributed negatively to first quarter’s shock 3.2 percent plunge in the gross domestic product.