South Africa’s gold-stocks gauge fell to the lowest level in in 4 1/2 years as the price of the metal retreated.A worker pours molten gold at a Simmer & Jack gold Mines Ltd in Buffelsfontein, South Africa. Photographer: Naashon Zalk/Bloomberg News

Dineo Faku

Gold and platinum shares plummeted yesterday, extending a rout that took hold on Friday, as weaker-than-expected Chinese growth figures fuelled concerns about the global demand for commodities.

The sell-off saw the JSE retreating further from its recent record-setting run. The gold mining index slid 21 percent over two days to 1 478 points, while the price of gold at the London afternoon fix fell to $1 395 (R12 530), $140.50 lower than Friday’s second fix. Platinum fell $66 to $1 448 an ounce.

Among specific shares yesterday, Gold Fields fell 4.56 percent to R58.82 and AngloGold Ashanti plunged 7.26 percent to R175. Impala Platinum dropped 5.67 percent to R116.02.

South Africa is the fifth biggest producer of gold and the biggest producer of platinum.

The soured sentiment on mining stocks comes at an unfortunate time for local mining firms as they are still grappling with the lingering effects of last year’s strikes, which crippled many gold and platinum mines for about two months.

Citigroup yesterday maintained its bearish stance on local gold shares, saying “current market valuations overstate the intrinsic value” of gold stocks and the market assumptions were too favourable, ignoring the reality of falling production, capital expenditure cutbacks and spiralling costs.

China is the biggest consumer of South African minerals, and any sign of weakness in the second-biggest economy raises concern about future demand for everything from iron ore to coal.

“Now the Chinese numbers start to disappoint, investors see more evidence of faltering global growth,” Maarten-Jan Bakkum, an emerging market strategist at ING Investment Management in The Hague, said. “This is not good for the commodity markets for sure.”

The Chinese economy grew 7.7 percent in the March quarter from a year earlier, short of the 8 percent median forecast in a Bloomberg survey of 41 economists. Industrial growth was 8.9 percent, well below the 10 percent that was expected.

The sell-off on the JSE mirrored losses in other emerging markets, with the MSCI emerging markets index down 4.5 percent.

The platinum and gold mining indices had lost roughly R10 billion each in market capital since Friday, Francois Venter at Investec Asset Management in Cape Town said. He said the numbers were a rough estimate calculated by using Friday’s closing index levels and current index levels, multiplied by index market capital information from Bloomberg.

“The gold market, and those of many other commodities such as silver, are currently in a state of irrational panic, but it is hard to pin the blame on any one factor. Instead it is likely to be a culmination of drivers, such as the exchange-traded funds,” Kieron Hodgson, a commodities and mining analyst at Charles Stanley Securities in London, said.

Last week Japan announced a decision to revive its economy by printing more money and Cyprus said it might sell off some of its gold reserves to help finance its bailout.

The weaker-than-anticipated gross domestic product and industrial production figures from China added to this “cocktail of bearish” sentiment that sent commodities into a tailspin, David Davis, a gold analyst at Standard Bank Securities, said yesterday.

The rand was bid at R9.1193 to the dollar at 5pm, 18.46c weaker than on Friday.

Statistics SA said last week that mining output volumes rose 7.8 percent quarter on quarter in the three months to February. The main contributors were gold, platinum group metals, diamonds and coal. – With Bloomberg