MOVEMENTS IN
THE MONTH.
Gold mining stocks have been
falling after a mini-bull run in
the first two months of the year
and their outlook remains bleak
to terrible.
The gold price fell from $1 220/
oz on 15 May to $1185,50/oz on
22 June, further depressing prices,
and with gold miners and unions
heading into traditionally damaging
wage negotiations, investors have
little to cheer about.
April mining production data
released recently was generally
positive, with output exceeding
expectations, but gold and coal
were excluded from the good news.
Both commodities fell year on year,
while overall production numbers
were pulled up by platinum group
metals and iron – with the PGM
numbers looking a lot better due to
the base effects of last year’s strike.
As a consequence, the JSE’s gold
index now takes on laggard status,
alongside the construction sector in
terms of relative performance over
the past 12 months (See: Figure 1 minor JSE indices chart).
The retail sector, in contrast, keeps
surprising to the upside. April retail
sales grew 3.4% year on year from a
revised 2.5% in March.
Figure 1
“We were expecting a much weaker
number given the impact of a
higher fuel levy and the imposition
of a 1% tax hike in that month,
although the tax increase will only
likely be felt in May numbers as
salaries are paid at month-end,”
says Jason Muscat, senior industry
analyst at FNB.
Given expectations of rising inflation
and interest rates, he expects retail
sales to weaken slightly in the
months ahead and remain under
pressure next year. “Retailers have
managed to claw back some margin
since the last downturn, but with
the oil price windfall a thing of the
past, margins are once again likely
to come under pressure.”
The JSE’s general retailers index
was climbing steadily until mid-April
– when it began drifting sideways –
and has widened the gap over gold
mining and construction.
46
ISSUE 4 – JULY 2015
Figure 2