The third quarter of the year saw the financial crisis, which has dogged markets around the world, reach new heights. Consequently, we saw increased risk aversion which resulted in the US dollar gaining 11% against the euro to end at $1.41/euro. The strong dollar worked against the precious metals complex. Gold fell to $891/oz from $930/oz at the beginning of the quarter. However, it reached a low of $754/oz. What was particularly disappointing about this period was that "safe haven" buying didn't manage to carry gold past its record levels achieved early in the year. The platinum group metals (PGMs) received a double blow as concerns about slowing auto demand in developed markets, particularly Europe (for platinum) and the US (for palladium), would create a surplus of metals - possibly this year, but almost definitely for next year. Platinum ended the quarter at $1 000/oz, a level it last traded at in early 2006. Rhodium lost almost 60% of its value and is now trading closer to the $4 000/oz mark. Palladium is sitting just above$200/oz having started the quarter at $465/oz.

On the equities front, the quarter, in particular September, belonged to Harmony (HAR) when at some point it rose by 50%, while the next closest, Gold Fields (GFI), managed to do 40%. Anglogold Ashanti (ANG) delivered a mere 11% during the same period as investors picked the one displaying the most leverage to a rising gold price. However, the shares are still trading below their peaks as the market remains sceptical of their ability to produce sterling numbers. Certainly, this ability was constrained when gold traded below $800/oz. However, the situation would have been ameliorated by the rand weakening. In fact, during the quarter, both prices moved by the same magnitude, leaving the rand gold price at R236 000/kg, a level similar to its opening at the beginning of the quarter.

A resurgent gold price capped a rather uneventful quarter. Bullion in US dollar terms opened the three-month period in review below $900/oz, but firmed to $930/oz as the dollar lost 3% to the euro at the end of June. Oil continued to break records as it breached the $140/barrel mark. A key highlight of the quarter was the investigation of the impact of speculators on the oil market. While politicians seem convinced that speculation is driving the oil price, market analysts are convinced that it is the forces of demand and supply. The continued rise in the oil price ferments inflation across the globe, making gold an attractive investment to hold. In rand terms, gold traded in a range of R209 000/kg and R240 000/kg. The average for the quarter, though, was similar to the first quarter's R223 000/kg.

The shares followed the trend set by the gold price. However, actual performance was markedly different among the three major gold stocks: Harmony (HAR) led the way with a 5% rise, Gold Fields (GFI) lagged with a drop of 7% and Anglogold Ashanti (ANG) was middle-of-the-road with a negative 2%. ANG's rights were traded during June. After a lukewarm welcome from the market, they were sold down by 50% until news spread that some of the offshore shareholders were keen to get more exposure. After that, the NPLs regained some of the lost ground, but in the end they were 10% below their opening level of R75/NPL. The fund has exposure to ANG and it followed its rights.

Although the gold price started the year on a firm note, breaking the $850/oz record set in the eighties, to reach a new high above $1 000/oz. It suffered a rather precipitous fall mid-March to end the quarter at $935/oz. The randgold price followed suit, touching R260 000/kg before ending the quarter at R243 000/kg. The rally in the gold price was underpinned by a weak USdollar that depreciated to a record level of $1.58/EUR. Of course, concerns around the weakness of the US economy were the major influence on the dollar.

The big news in SA's mining sector was the Eskom power cuts and their impact on operating activities at the mines. Eskom released a statement that it could not guarantee supply and compelled the mines to cut their electricity usage to 90% of 2007 consumption.The worst affected sector was the gold sector, with its deep undergroundmines that need a set minimum electricity load to stay operational. The platinum sector fared better because the mines are shallower and they can shift their loads between mining activities and processing activities without impacting much on output. December's results were also published during the quarter. Margin performance for both Gold Fields and Harmony was much improved, but Anglogold performed badly due to the effect of the hedge book. Although the March results are unlikely to be anything to write home about, the company management at all three are pointing to a better second half of the year.

Despite the gold price rising 12% in dollar terms during the course of the fourth quarter of 2007, gold shares moved in the opposite direction. Bullion was driven by a weak US dollar, which touched a record low $1.49/euro. Coupled with the weaker dollar, oil prices were also a major factor driving the yellow metal upwards. Oil markets were impacted by constraints on the supply side that became more prominent as the Northern Hemisphere winter approached. Brent crude reached an all-time record of $96/barrel, but demand did not stutter, as most of the demand emanated from non-OECD countries that need the oil to fuel growth (namely China and India). A high oil price tends to stoke inflation fears, and some investors see gold as a hedge against inflation. Towards the end of the year the political violence in Pakistan seemed to ignite some safe-haven buying of the yellow metal, helping it achieve a late spurt.

However, the gold index was down 11%, led by Gold Fields (GFI) which was down 19%, and Harmony (HAR), which fell 11%. Anglogold Ashanti (ANG) declined by 3.5% during the three months to December 2007. ANG was supported by Mark Cutifani, the new CEO, meeting with investors and relaying to them his plan to maximise the benefit from a rising gold price. The major focus of the plan is to tackle the hedge book and rationalise the portfolio of operations. HAR announced that it will enter into a joint venture with a private equity fund regarding the capitalisation of the Cooke shafts. GFI has suffered from a spate of bad news since the beginning of 2007, and its latest guidance for fourth quarter production did not help the situation, as production is expected to fall by about 4% during the quarter.