The global outbreak of COVID-19 has been good for the gold mining sector, with investors rushing to buy the yellow metal to safeguard their wealth.
Marco de Matos, an analyst at Anchor Capital, said gold has historically been a safe haven in times of uncertainty. “Gold breached the $1,980/ oz price level last week for the first time since 2011 and SA gold miners’ share prices have been on a roll as the economic disruption created by the pandemic, as well as the consequent central bank stimulus efforts, sent investors to gold,” De Matos said.
“The yellow metal has always been regarded as a safe-haven asset, meaning that it is not
correlated to the economy as a whole and can instead maintain or even increase in value during periods of high market volatility, such as we have been experiencing this year.”
Gold and resources stocks lifted the JSE in July. Pan African Resources saw its share price rally 54.9% in the month, while Harmony Gold surged 53%. Gold Fields value increased 37.2%, Royal Bafokeng Platinum went up 44.5% and Patrice Motsepe’s Africa Rainbow Minerals increased 14%.
So good was the gold rally that Gold Fields said this week that booming gold prices could drive up half-year profit by more than 300%. Minerals Council CEO Roger Baxter said the broader mining sector can still flourish if the industry can be modernised, have reliable and affordable energy supply and have policy and regulatory environment that was clear and workable. He said these are some of the issues all stakeholders should ponder on.
“If the right actions are taken in answering all these questions, it could result in an additional $3.6-billion in mineral sales, R300-million additional tax revenues, 70,000 jobs saved and an additional 26,000 mining jobs and 47,000 indirect jobs created by 2024. These steps require a co-operative and united approach by all industry stakeholders if we are to succeed,” Baxter said.
