The gold price closed the quarter at US$1 187 per ounce, having fallen 5% over the third quarter. The gold price faced headwinds from a strengthening US dollar, which has been firming over the quarter as the US economy continues to strengthen relative to other developed markets. Gold may find sporadic support in response to intensifying trade war news flow, but this will be countered by market anticipation of further rate hikes by the US Federal Open Market Committee (FOMC). Physical demand for jewellery, coins and bars will provide a price floor at lower prices. The COMEX market for gold futures contracts is in a net short position for the first time in years, reflecting weak investment demand. Longer term, this should prove to be a bullish signal for the gold price.

The Old Mutual Gold Fund has a composite benchmark weighted 70% to the FTSE/JSE Gold Mining Index and 30% to the FTSE Gold Mines Index, which is comprised of global gold stocks. The FTSE/JSE Gold Mining Index fell 6% over the quarter, while the FTSE Gold Mines Index fell 15% in rand terms.

Harmony Gold and AngloGold Ashanti were the strongest performers on the local front this quarter, rising 10% and 9%, respectively. The fund holds a stake in both these counters. On the international front, the relative outperformer was Australian producer Northern Star Resources.

Sibanye-Stillwater entered into a US$500 streaming deal with Wheaton Precious Metals, agreeing to sell a portion of their production from their Stillwater asset at a discounted price over the life of the mine in exchange for an upfront cash injection. This has relieved pressure on the Sibanye-Stillwater balance sheet, but it remains at uncomfortably high gearing levels for a miner. The exposure in the fund remains low. AngloGold Ashanti remains the fund’s largest holding, followed by Gold Fields.

AngloGold Ashanti has a globally diverse portfolio of assets with brownfields and greenfields expansion opportunities. A new CEO has joined the group, having left Barrick Gold. His fresh perspective could enhance the group’s ability to further optimise its portfolio and operating costs. The international background of the new CEO highlights that AngloGold’s future focus is on its ex-South Africa assets. It is probable that further value can be unlocked by selling the remaining South African assets.