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Wed, 19 Sep 07
» JSE:ANGLOGOLD ASHANTI LIMITED:
32875c 1%
S.African gold stocks rocket on bullion price
Allan Seccombe
Posted: Wed, 19 Sep 2007
[miningmx.com] -- SOUTH African gold shares bolted out of the starting blocks on Wednesday morning after the gold price rocketed towards 26-year highs after the US Federal Reserve cut interest rates by half a percentage point on Tuesday.
South African gold shares across the board were higher, with the sector last up 2.2%, slightly behind the overall market's three percent rise.
"It's all rocking. It's happy days for everyone after the interest rate cut," said Sasha Naryshkine at Vestact, a private client institution.
The leveraged plays rose as strongly as the other gold companies.
AngloGold Ashanti was up 1.23% at R329 per share. Harmony posted a similar gain to R81.50. Gold Fields put in the largest gain of the majors, adding 3.5% to R123.60.
The more marginal companies like DRDGOLD also turned in a strong performance, putting on 3.4% to R5.74. The company, which on Tuesday said it was selling its Australian subsidiary Emperor Mining, traded R3m in the first 20 minutes of Wednesday's trade, half of its daily R6m average.
Simmer & Jack gained three percent to R5.34.
Gold pushed to a high of $726 an ounce, its best level since May 2006 and just four dollars shy of its 26-year high of $730 high it reached in that month. The dollar depreciated after the US interest rate cut.
Click Here to subscribe to our daily newsletter"We are seeing the gold stocks benefiting from this environment. The South African gold stocks have also underperformed because of things like general fears associated with Harmony's accounting smash," said a gold analyst.
The gold price could push through the $730 level, the analyst said. If gold does breach that level, it will be at its highest since January 1980, when it reached an all-time high of $850.
"If the US dollar continues to be panelled, and it looks like it's getting a proper poking, I think that is definitely on the cards."
The dollar depreciated to a 15-year low against a basket of currencies on Wednesday amid broad sales of the dollar on news of the rate cut, the first in four years. The dollar fell broadly, pushing its trade-weighted index to 79.091, its lowest since 1992, but recovered to 79.229 by 0808 GMT, Reuters reported. The U.S. currency held near its weakest level against the euro hit on Tuesday -- the euro rose to within a whisker of $1.40 -- and analysts said the dollar was likely to remain under pressure, the newswire reported. Yukuji Sonoda, a precious metal analyst at Daiichi Commodities in Tokyo told Reuters: "There's a strong possibility gold will reach $740 or $750 at the end of this month."
The rand gold price of R165,000 per kilogram is also near record highs, boding well for all gold miners in the country, particularly those with marginal assets.
"This environment is more and more lucrative for these counters," the analyst said. "Investors still focus on the fundamental value before they look at gearing, but gearing is definitely a consideration."
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