Solid Gold

Trading on the JSE was dominated by the strong performance of the gold mining and banking stocks that recorded increases of around 2% yesterday.

The Efficient Group reports that the gold market benefited from the continued weakness of the currency together with the rise in the gold price yesterday. Harmony moved higher yesterday despite a ratings downgrade from Fitch.

The rise in the banking stocks came despite expectations of rising interest rates, indicating that the market is not too concerned with the profitability of banks when interest rates rise.

With the oil price climbing slightly yesterday Sasol found some support to close at R237.50 but still lower than recent highs.

The weakening of the currency early this week was seemingly overdone and is being corrected with the rand now moving below the R/$6.80 level. The currencys volatility has increased uncertainty over the future of inflation, en therefore also interest rates, leading to an increase in volatility on the markets.

The bond market traded flat yesterday as traders try to map the future of inflation in South Africa. Commodity prices recovered slightly yesterday as there was some bargain hunting on the gold market, while oil was supported by the decision of OPEC to cut production by 1-million barrels per day.

Trading on the South African market is expected to be sideways with a bias to the downside as some profit taking is expected.