Gold..........
The Gold price tumbled as much as 4% on Wednesday, touching a low
last seen in August 2010 and potentially endangering the future of some
of South Africa's top gold mining houses if the fall continues. The top
three JSE-listed gold shares — Anglo Gold Ashanti, Harmony Gold and Gold
Fields — have shed a combined R100bn in value so far this year,
underlining concerns over the sector's future. Predictions that gold
could fall under $1,000/oz as expansionary monetary policies are reined
in, especially in the US, are putting further pressure on gold miners.
The companies are also facing surging labor unrest, and wage demands
ranging from 60% increases to a whopping 100%.
The JSE gold index
is down 23% this month for a 48% loss so far this year. Harmony and
AngloGold shares have lost 54% and 49%, respectively, since the start of
the year, while Gold Fields has given up 47% since Sibanye Gold was
unbundled on February 11.The gold industry is under attack from all
sides, said independent analyst Ian Cruickshanks. With the price in bear
market territory, it is very difficult to make an investment case for
the sector and its future in South Africa is limited.
Earlier this
week, the Association of Mineworkers and Construction Union tabled a
100% wage demand for all unskilled and semiskilled employees in the gold
industry, raising fears of a strike and attendant consequences for
production if its demands were not met. The National Union of
Mineworkers tabled a 60% wage demand last month.
Spot gold fell to
lows of $1,236.25oz on Wednesday, which analysts deemed unsustainable
for the bulk of South Africa's gold mines.” The gold spot could go as
low as $1,000/oz, further impacting gold miners negatively from the cost
point of view. The $1,300/oz is, on average, the break-even point for
gold companies to produce gold profitably, said Rezco Asset Management
investment director RobSpanjaard.
The dollar-denominated metal has
lost 25% in value this year as investors cut back their positions amid
expectations that the US Federal Reserve (Fed) will wind down its cheap
money policy.Gold is susceptible to so many exogenous factors. Investors
had previously bought gold to hedge themselves against the threat of
global inflation as a result of the US's easy monetary policy, Sasfin
Securities portfolio manager Nicholas Sorour said.
The metal is
also generally perceived as a haven from collapse scenarios, and demand
will tend to wane when market players feel better about the global
economy.Rand Merchant Bank analysts said the fall in the gold price has
not hit the rand yet but we are increasingly concerned that the Fed
tapering is going to generate a further bear market in South Africa's
commodity export prices.
The Fed's action, along with liquidity
trouble in China's interbank market, was adding to commodity price woes,
Standard Bank analysts said.
Source by Commodity Insights
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