Gold Is Buoyant despite Falling Equity Markets

(Continued from Prior Part)

With the rising turmoil in the global markets, especially in emerging markets, investors jumped to South African gold shares like AngloGold Ashanti as the nation’s currency fell. The weaker rand is also beneficial for the mining companies. Their costs are in the rand and their revenue is dollar-denominated.

Due to the downfall in the Chinese markets—South Africa’s top export destination—the rand and the local stock markets fell in South Africa. The shares fell to a five-year low. The rand also fell close to 8.50%. Now, it’s trading at 13.41 per US dollar. In the above chart, you can see the prices for South African miner AngloGold Ashanti for 2015.

Gold rose by 2.24% and settled at $1,153.20 on August 20. The next trading day also had a marginal rise. Silver rose on August 19 and 20 after falling 3.35% on August 18. Platinum and palladium rose 2.15% and 2.25% on August 20.

Gold-backed ETFs like the SPDR Gold Shares ETF (GLD) rose during the week ending August 21. However, the ETFs fell during trade on Monday, August 24. Mining companies like AngloGold Ashanti (AU), Sibanye Gold (SBGL), and Gold Fields (GFI) were among the top five performers on the African Africa All-Share Index in Johannesburg on August 24. These companies account for ~10.50% of the Market Vectors Gold Miners ETF (GDX).

AngloGold Ashanti plans to cut its interest payment by one-third of the current outstanding debt. It has offered to buy back $810 million in high-yield bonds. The company mentioned that it will pay $1,075 for every $1,000 of bonds for the first ten days of the offer and $1,045 thereafter. The money to pay back the debt will come from the sale of its Cripple Creek & Victor mine. This is a step to reduce interest bills and cut debt so that the company can have more cash in hand.

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Browse this series on Market Realist:

• Part 1 - Gold Is Resilient to the Fed’s Likely Questionable Liftoff Move
• Part 2 - China’s Falling Stock Market Pushes Gold Upward
• Part 3 - Broad Commodities Market Sell-Off: Impact on Gold