Johannesburg - Gold stocks rallied on the JSE yesterday as the devaluation of the Chinese yuan ignited demand for safe haven commodities amid concern that more countries will weaken their currencies.
Gold is considered a safe haven asset as throughout history it has been viewed as a store of value that cannot be manipulated by interest rate policies and has traditionally been used as a hedge against inflation.
Spot gold climbed by 1.27 percent to $1 125 (R14 319) an ounce yesterday, the highest since July 20 and above the $1 100 mark, which is an important psychological level for the market.
The rally follows the decision by the People’s Bank of China to allow the yuan to depreciate by 2 percent against the US dollar on Tuesday, and shift to a more market-determined rate, sparking concern that the economy is faltering.
The devaluation saw Sibanye Gold shares swell by 8.98 percent to R15.66, Harmony Gold by 7.24 percent to R13.62, Anglogold Ashanti by 11.78 percent to R86.75 and Gold Fields by 11.83 percent to R37.71.
Gold producers said the yuan devaluation would not have a direct impact on their local operations as they did not sell their gold in that currency.
“It is positive that the yuan devaluation has provided a temporary halt to the slide in the gold price, but it remains to be seen whether that trend can hold,” Sven Lunsche, the Gold Fields vice-president for corporate affairs, said yesterday.
Local gold producers sell part of their gold to China.
Chris Nthite, the spokesman for AngloGold Ashanti, said the devaluation of any currency reinforced the attractiveness of gold not only as a safe haven asset, but also as an ultimate store of value.
“As a currency, gold has a history that spans millennia because people concerned with safeguarding wealth recognise that gold is insulated from the vagaries of government policy,” he said.
James Wellsted, the spokesman for Sibanye Gold, said the devaluation would not affect the company’s financial standing as it had minimal debt that was rand denominated.
He said: “It has had short-term benefits, including a possible delay in the US raising interest rates, but structurally nothing has really changed. This will improve revenues, although the gold price is still lower than at the beginning of the year.”
Ross Norman, the chief executive of a London-based metal dealer, said: “The gold price is the sum of all fears, and we are seeing a reflection of nervousness in the market following the yuan devaluation.”
By devaluating the yuan, China will see its exports become cheaper overseas, potentially creating a glut for some of the same commodities that South Africa relies on for its foreign currency earnings.
Sibonginkosi Nyanga, an analyst at Imara SP Reid, said the devaluation was negative for oil production.
BUSINESS REPORT