25 June 2019

South Africa: Bullion's Current Tear Offers Scant Golden Opportunity for South African Producers

analysis

Bullion's spot price is on the up, hitting six-year highs on the prospect of lower US interest rates and rising tensions between Washington and Tehran -- a winning combination for gold bulls. South African producers of the precious metal should see rising profits as a result, but there is no golden opportunity for an industry in a serious state of decline. And the ultimate costs to the South African economy may be high, given that Donald Trump's actions are helping to propel gold's run.

South Africa's monthly mining data should put paid to any hopes that bullion's current bull run could help revive the national gold mining industry. In April, when overall mining production declined 1.5% year on year, gold output slid a steep 19.5%. According to chief economist at the Minerals Council South Africa Henk Langenhoven, that is just the tip of the iceberg.

"The established lag between commodity price changes and production responses (between 12 and 18 months) is changing, meaning that production is not responding with the same lag as in the past, that is, production should have been improving by now, if the relationship was holding," he said in response to queries from Business Maverick.

Basically,...

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