Pandemic brings forth gold bulls as price hits record high

Gold was last above $1,900 an ounce in 2011, but then lost traction as the global financial crisis faded and other asset classes began delivering returns. But the Covid-19 pandemic and the uncertainties triggered amid a global economic meltdown have added new sparkle to the precious metal’s status as a “safe haven” – a place to store your money while the storm rages. 

Gold’s spot price had been gaining steadily this year and it was only a matter of time before a historic peak would be scaled. Fresh tensions between China and the US provided the latest lift into record territory, bringing its gains in the past 14 months to over 50%.

“The continued demand for a safe haven, it all plays into gold’s strengthening,” Shafali Sachdev, the head of FX Asia at BNP Paribas Wealth Management in Singapore, was quoted as saying by Reuters. “And at this point, there doesn’t seem any obvious factor that could help the trend to draw to a close.”

Indeed, much of the market chatter has $2,000 on the cards and from there, who knows? But one of the few things that is certain at this stage in the global economy is that things will remain uncertain for a while, and that alone will remain supportive of gold.

On the JSE, gold producers shone on Monday, with Gold Fields’ and Sibanye-Stillwater’s share prices both rising more than 9% while AngloGold Ashanti’s climbed 8.8%, according to Sharenet data.

A record gold price is also good for the South African economy more widely – it will boost export revenues at a time when they are badly needed – which in turn is positive for the rand. But while gold’s price has probably not reached its ceiling yet, gold production in South Africa remains in a steady state of decline into the basement.

A few decades ago South Africa accounted for over 70% of global gold production. But South Africa is now ranked 8th in the world in terms of gold production, with Peru and Indonesia among others now ahead of it. A record gold price is hardly going to pull South Africa out of the depths of its current recession. DM/BM