Good GDP News, Gold Prices Not so Much
South African miners
The recent surge in gold prices as of February 26, 2016, has helped South African miners as their home currency, the rand, saw a depreciation of almost 26% against the US dollar. South African miners cover their costs with the rand, which is comparatively weaker, and sells core assets, particularly precious metals, in the US dollar, which is relatively higher.
Notably, South African miners including Sibanye Gold (SBGL), Harmony Gold (HMY), AngloGold Ashanti (AU), and Gold Fields (GFI) have all gained by 50.5%, 62.1%, 44.2%, and 21.8%, respectively, during the past month, and the rise is due to the recent ~16% surge in gold price. The chart below shows the comparative rise in the price of gold, depicted here by the SPDR Gold Shares (GLD) and Sibanye Gold.
Sibanye Gold is one of the biggest miners of gold in South Africa and is planning to buy additional gold and platinum mines in South Africa. The company may try to capitalize on the rising price of gold and thus further improve its profit margins. The new purchases are in addition to the takeovers of Aquarius Platinum and three of Anglo American Platinum’s Rustenburg mines.
The current trading price of Sibaye is at $13.70, which represents a whopping 88% premium over its 100-day moving average price. But these details may suggest the possibility of a price reversal. Also, Sibanye’s RSI (relative strength indicator) level is at 72, and any level above 70 indicates a pullback in price or overvaluation.
In the short run, such technicals play a crucial role analyzing a company and its asset performance, whereas fundamental indicators help to determine the price changes for the longer run.
For further analysis, check out Market Realist’s Precious Metal Mining page.
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