ALAN FINLAY & AFP, Johannesburg | Monday 7.20pm.
THE gold price sky-rocketed on Monday, and at 4pm shined at $282,58 an ounce, a whopping 9,95% up on Sunday.
One analyst said it is a clear indication that the yellow metal’s woes are finally over.
Market analyst for Standard and Poor’s MMS, Ray Brand, said markets are looking nervous ahead of Y2K, which is putting gold in a positive light.
Today’s strengthening of the yellow metal comes after last week’s Bank of England auction, which saw producers buying up reserves in a show of “political strength to offset the speculators”, Brand said. “It’s as if they were saying ‘we can’t just sit back’ and it’s a ploy that worked.”
However while economists welcomed the dramatic increase in gold prices, they cautioned against thinking the improvement will save thousands of jobs threatened in the country’s mining industry.
Gold fell back to $281.20 at the end of the day, after trading at $258.25 last Tuesday.
The rand gained ground against most major currencies, and at 4pm was trading R5,99 to the dollar, and R9,86 to the pound.
On the back of the surge the Johannesburg Stock Exchange’s gold index closed 14% stronger after opening the day at 1,034 points.
“It could save a few mines that were teetering on the brink of having to close down when the price was at 252 dollars (an ounce),” economist Tony Twine said.
The South African economy was battered when the price of bullion plunged below $250 an ounce for the first time in 20 years after the Bank of England’s first auction of its gold reserves in July.
The price dip forced one mine to close and six others threatened to lay off a total of 11700 workers.
“I don’t think the current price is going to save an awful lot (of the threatened jobs) — it might save some on the margin,” Twine said.
Peter Bunkell, a spokesman for the Chamber of Mines which represents major mining houses, added, “We are very excited about the price, but it is still lower than the price at the end of last year.”
“It is premature to suggest the dramatic increase in the price of gold in the course of one day is likely to change things in the industry to the extent that people would withdraw their retrenchment plans,” he said.
The National Union of Mineworkers was upbeat, however, with a spokesman saying on SABC radio that the price increase and reorganistion in the gold industry could “reverse the intention” of companies to lay off workers.
Gold makes up some 17% of South Africa’s exports, worth about 25 billion rand (about four billion dollars) a year.
Twine said every $10 increase in the price, sustained over year, translated into a $160-million boost in foreign exchange earnings.
The dramatic turnaround in the price of the metal followed an announcement by 15 European central banks that they will not “enter the market as sellers, with the exception of already decided sales” for the next five years.
Brand also said that Sunday’s European Central Bank statement in Washington that it will be selling about 400-tons of gold a year over a 5 year period has “taken a great big unknown out of the market.”
The JSE on the whole weathered the fall-out from the gold price hike. Only financials posted a loss ending the day 0.41% down.
The JSE Overall was 2,04% up by close of play with the JSE Allgold 14,04% in the clear. Industrials lifted 0,89% with the Alsi-40 booming 2,62%.
Both Hong Kong’s Hang-Seng and Tokyo’s Nikkei took a battering with the Nikkei ending 2,91% down. The Hang-Seng lost 3,44% on the day. At 4pm New York’s Dow Jones was looking positive, trading 0,76% in the green.