Gold reaches a record $3 085 as investors flee to this safe haven.
Image: Reuters
Chris Harmse
Gold recorded a new record level of $3 085 in intra-day trade on Friday. Analysts like Goldman see the price for bullion at $3 450 over the next 12 months. The ongoing Trump-led tariff war with the rest of the world is expected to drive up global inflation and weigh on risky assets like equities, reinforcing gold’s role as a safe haven for investors.
The possible break in the Government of National Unity, given the stalemate position on the national government’s Budget, has put the Rand exchange rate under pressure, as the currency closed Friday on R18.44 to the dollar (22 cents weaker for the week), R19.96 against the euro (16c weaker), and depreciated during the week with 34c to R23.88 against the pound.
The JSE All Share Index enjoyed a robust performance last week, climbing 56 points to maintain its position above the 90 000-point mark for the second consecutive week. On Friday, the index reached an intra-day high of 90 141 points. For the month of March up to that point, it surged by an impressive 4.2%, reflecting a year-to-date increase of 6.2%.
Although the industrial and financial index will continue to stay under pressure on the back of the weaker rand, the precious metal index is expected to remain bullish and will attract investors across the globe. The JSE compares favourably with global indices, like the S&P 500, which lost 2.1% last week and dropped by 5.2% over the last month. The Morgan Stanley Capital International (MSCI) world index traded down by 1.5% over the past five days and for the month has lost 4.5%.
In the US, more households are getting nervous about possible higher unemployment in months to come and amid worries around rising inflation due to the tariff war. This is the opposite of what President Donald Trump has in mind with his make-US-better tariff policies.
Consumer sentiment declined by 12% in March, the University of Michigan reported in a survey released on Friday. Respondents blamed Trump’s erratic trade war for their jitters, the survey said.
“Consumers continue to worry about the potential for pain amid ongoing economic policy developments,” said Joanne Hsu, the survey’s director. “Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009.”
Trump on Wednesday announced 25% tariffs on all cars shipped to the US, a significant escalation in a global trade war. South Africa’s three major exporters of cars to the US, namely BMW, Mercedes, and Volkswagen, may experience a big downfall in sales if the African Growth and Opportunity Act agreement with South Africa is cancelled by the US.
According to government figures, vehicles account for 22% of South Africa’s total exports to the US, second only to precious metals.
Given the threat of higher import tariffs on new motor car imports to the US, the release of South Africa’s new vehicle sales for March this coming Tuesday becomes more important. Over the next few months, these sales will become more and more a leading indicator for South African risky assets like shares.
On global markets, investors wait for the announcement of the US on Friday for the non-farm payrolls for March. Given the worrying effect of the outcome of Trump’s tariff war, the number of new jobs created, and the unemployment rate will be of concern. It is expected that the US will increase jobs by only 80 000 in March, against the 151 000 new jobs in February.
It is expected that the US unemployment rate will be higher at 4.2% in March against 4.1% the prior month. These figures, if forecast correctly, will amplify worries by US households in the US causing US share prices and the dollar to remain under pressure.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
Image: Supplied
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
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