Gold and the rand have erased their gains this year, with bullion enduring its worst performance, to the middle of this month, in seven years.
Fears over Europe’s future have been heightened over the past few weeks following recent poll results in France and Greece, with anti-austerity parties in the ascendancy.
Gold fell for a second day, shedding as much as 1,5% yesterday, erasing gains made this year. At $1563,33/oz it is now trading 0,2% weaker. Other metals such as platinum, copper and nickel also traded weaker yesterday.
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"No one can quantify what a Greek departure from the euro zone would mean for investor confidence in the region," Nomvuyo Guma, currency strategist at Standard Bank, said yesterday.
The Greek economy represents 2,2% of the 17-member zone, which accounted for 22% of SA’s exports last year.
Apart from fears over political developments in Europe, recent economic data out of US and China - the world’s number one and two economies - have pointed to a sluggish global economy.
China cut its bank reserve requirements for the third time in six months after industrial output, new loans and retail sales grew less than forecast last month, a sign that the slowdown may be steeper than expected.
The rand tracked gold’s weakness yesterday, also erasing its gains for the year, and at R8,18/$1 was trading at its lowest level against the greenback since December 29.
Global risk appetite remains tentative as long as European Union anxieties persist, Barclays Capital economists said in a note yesterday. "Currencies such as the rand are likely to remain on the back foot," they said.
Gold and platinum, which fell as much as 1,3% this year, provide the bulk of SA’s export earnings.
"It’s all dollar driven," Bernard Sin, head of currency and metal trading at MKS Finance in Geneva, said. "The market is under tremendous pressure with talk of Greece exiting the euro zone. For the time being, gold doesn’t look like a safe haven."
Resource exports make up 20%-30% of the total pool of exports. Weaker metal prices will affect the government’s attempts to lower the unemployment rate, which at 25,2%, is among the highest in the world.
The JSE all share index fell 1,4% yesterday, in line with weaker European and US stocks. Gold Fields fell more than 4% and AngloGold Ashanti 2,9%.