Gold price set to soar

BULL RUN: TO POWER PRECIOUS METAL STOCKS TO DIZZYING HEIGHTS

- Ciaran Ryan

ON A ROLL. Investing in gold shares can be exhilarating, but requires a cast-iron stomach.

(Picture: Bloomberg)

Gold came within a whisker of $3 900 (over R67 000 an ounce this week, powering precious metal stocks to dizzying levels.

AngloGold Ashanti is up 194% year to date, Gold Fields 193%, and Harmony 103%.

The irony is that AngloGold no longer has any mines in SA. Gold Fields has one, at South Deep.

Also crowding the list of the year's best performers are Impala (up 159%) and Valterra, formerly Anglo Platinum, which has risen 120% since January.

These are the stocks that have driven the JSE All Share Index, which is up 29% so far this year.

JPMorgan expects gold prices to average $3 675/oz by the fourth quarter of this year and climb toward $4 000 by mid-2026. Gold prices have exceeded most forecasts, so these projections could turn out to be conservative.

Gold miners - the smart ones - assume that disaster is just over the horizon. They hoard cash in the event that their assumptions prove correct.

By hoarding cash, they are in a continual war against costs.

They also need cash as a war chest for new opportunities, according to an analysis by 80eight. This keeps them nimble and better able to respond to price shocks.

George Cheveley, global gold portfolio manager at Ninety One, believes the gold stock rally still has legs, after coming away from meeting 30 gold companies at the recent Mining Forum Americas.

"Cost control remains a priority for most companies, which are keen to prove to investors that they can convert record margins into cashflows," says Cheveley.