Worst-Ever Quarter for South African Stocks Has a Gold Lining

(Bloomberg) -- South Africa’s stock market is set for its worst quarter on record as the coronavirus ravages global equities, but gold miners are at least shining amid the gloom.

The FTSE/JSE Africa Gold Mining Index is the sole Johannesburg industry sector to post gains in 2020, rising 11% as bullion prices advance for the sixth consecutive quarter. The broader South African stocks benchmark is down 24%, the worst performance since Bloomberg started tracking it in 1995.

And more gains for the sector could be in store, according to Seleho Tsatsi, an investment analyst at Anchor Capital in Johannesburg. Gold’s rise, tempered by a rush to buy dollars among anxious investors, should resume as unprecedented interventions by central banks to reduce borrowing costs and counter the pandemic’s economic destruction add to the precious metal’s allure.

“With the very strong response seen from major central banks around the world, it seems likely that real rates will remain relatively low for now, which should be supportive of gold,” Tsatsi said.

An end to the current scramble for cash as the global economy emerges from the worst of the pandemic should be positive for gold, according to Rene Hochreiter, an analyst at Noah Capital Markets Ltd. He foresees a repeat of the pattern 12 years ago when the global financial crisis hurt sentiment toward bullion, only for it to rise to a record the following year.

“We are still in the panic phase -- there are still people selling everything they have got just to make sure they have enough cash to last however long people will be without jobs,” Hochreiter said. “After three months, the gold price should start outperforming,” he said, estimating a level of $2,000 an once by the second quarter of 2021, almost $400 higher from Monday.

©2020 Bloomberg L.P.