You're listening to Strictly Business Podcast with Lindsay Williams.
JSC has closed its doors for another day, so it's time for the 5 o'clock shadow.
And as always on a Wednesday, I speak to Skulk Lowe, Portfolio Manager at PSG
Wealth Old Oak in Cape Town.
Now then, Skulk, I was watching a programme the other day.
I think it was the BBC Business News, actually, in the morning, and the chap was
saying it could even go to 3,000 today.
And you know what I'm talking about.
talking about gold.
It was something like 2940, 2950.
And obviously it's pulled back since then, understandably.
But he made a couple of good points.
He said that with the tariffs that Trump is implementing on certain metals,
gold may also suffer because of that.
So there's been an enormous amount of interest from the United States to import
gold.
And that sort of caused a little bit of a squeeze.
Now, obviously, that was grossly exaggerated.
but on the other hand he also said that the people that are buying gold at the
moment proper buyers long-term holders
and gold is not behaving as it normally does would you agree with any of those
comments i i agree with all of those
comments i mean it's it's the strangest year i
mean yes so you you're 100 right i mean we're sitting with with uh and we're going
to touch on on the miners a little
bit later but gold itself yesterday taking a bit of a breather but you can i mean
We're coming out of a week or two where literally every single day when I put on
my new service,
one of the first things that pop up is gold reaching new all-time highs.
Gold reaching new all-time highs.
And as we get closer to this magical 3,000 mark, it's sort of popping up.
Gold getting close to 3,000 mark.
And it feels like yesterday, and it's not too long ago,
but it feels like yesterday when we had this conversation with Gold.
touching on those $2,000 mark.
And we asked ourselves, are we going to surpass that again?
Are we going to actually move beyond the $2,000 mark?
Well, we know the answer now.
We've gone beyond it and now flirting with $3,000.
It might well be, sorry to interrupt you, it might well be that there's some
optionality going on here.
And the 3,000 level and levels between now or 29, 15, 3,000,
the people that have written options are protecting it somewhere.
I don't know, that does happen when you get these big round numbers sometimes.
You know, there's so many reasons.
We know that China's now given sort of the go-ahead for the pension funds or people's
pension
funds to invest in gold as well.
So there's many, many moving parts.
But, I mean, you said it earlier.
It's a strange, strange market because we went into this year.
We knew that Trump was taking office.
There is, what is it, acceptance speech.
It would have been he started on the 20th, and everybody was looking at the 20th of
January.
And as we get close to this 20th of January, we saw the dollar just
skyrocketed.
I mean, it went from the Dixie or the dollar index went from around about 100
points six months ago
and went beyond the 109 levels.
And over that period,
you would expect with that type of dollar strength that the gold would should, in
theory, it should weaken.
But it didn't.
It actually merely ran with the dollar that it improved.
And then the dollar took a bit of a breather and the gold kept on running.
And now the dollar is running again for the past few days and gold is running with
it.
The dollar can be considered a safe haven.
And also, especially after what Jerome Powell said, he said he's in no hurry to
cut interest rates because the U.S.
economy is still doing well.
But if the dollar is a safe haven,
then gold has regained that safe haven legend that it had so many years ago when
both you and I started in the business.
I agree.
It's definitely taken that safe haven status back.
You can see people are not buying into the we're going to get inflation down to the
lowest
levels ever.
They're not buying that.
I'm trying to do my best.
I know you can do a very, very good Donald Trump, but it's not going to get it there.
I mean, unfortunately, not what I'm seeing currently, not when you had a January
where,
well, what was it?
We had most of the, well, 6%, 7% growth in gold.
All the PGMs were also around about the 8%, 9% higher.
Copper.
copper trading seven seven odd percent higher and and and um uh january
brent where most of the research report indicated in december let's go to november
december all these big
financial houses they had concerns that they said well we should go into into
2025 and and the oil should be Ah, it should be under pressure,
but it should stay low.
We should see it between the, let's call it $60 and $70 levels.
Well, surprise, surprise, we're not there.
We're struggling to keep it.
I was one of those oil bears, by the way.
I really was.
I thought it was going to $40, $50 per barrel, but it's stubbornly, stubbornly
high.
And I think that's because the US economy is still doing well and China is
constantly threatening to do well as well.
So it's not at a point where I think any of the US government,
President Trump or any of those people are having sleepless nights.
But still, we're looking at a Brent level that's above the $76,
$75 per barrel level, flirted with the $80 just a few days ago.
So I would just say I don't think if you look at the CRB commodity index in
general,
reaching not new highs, but just.
Powering recent highs.
Yeah, I'm looking at it now.
It's a new recent rise, yeah.
Exactly, recent highs.
And it's powering ahead.
And I'm asking myself, what's going to stop this?
Tariffs?
No, no, no.
Tariffs are actually going to exact you at this.
This is going to actually sort of put a bigger spotlight on that.
I mean, are we going to see any of these,
let's call it policies that Trump is trying to implement that's going to make
any changes?
I don't think so.
So.
Yeah, gold's historic has always been one of the best,
let's call it defensive players or hedges against an inflation problem.
Yes, good.
And inflation is stubborn.
What was the CPI this afternoon, Skelton?
I'm sorry, the US CPI was today, wasn't it?
It did.
Where did it come in?
So what we had is year-on-year consensus.
was that it should be run about the 3.1 levels.
We know last time it was 3.2% levels, and it actually came out higher.
It came out...
Sorry, man, I'm looking at core inflation.
Core inflation came out 3.3.
So if you look at the normal inflation, again, 2.9 last time, previous.
It was forecasted that it should come out at 2.9, and it came out at 3%.
So...
I don't think people say this.
It's being stubborn.
People say sticky, but I prefer stubborn.
Yeah.
Correct.
And that's where gold comes into its own.
Yeah.
And that's why Jerome Powell cannot cut interest rates at the moment.
And also because of the strong economy.
There we go.
So there's your explanation.
Talking about gold, what about the miners?
I noticed Harmony and DRD Gold came out with numbers today and the market not
liking them.
Oh, that's obviously something to do with gold being down $21 an ounce.
But maybe a combination of the two?
Yeah, Pan-African Resources as well.
They also came out with that.
8% weaker.
I saw that one, yeah.
Yeah.
Yeah, so I just think production, that's the big problem.
I had this conversation with my team the other day, and they said, well, that's the
problem.
Most of these mines are really struggling to reach optimal production levels.
If you look at a gold price run about to $3,000 levels,
you would like to see these miners pretty much mine.
gold 25 hours a day.
I mean, that's what you expect them to do.
They unfortunately can't.
They're struggling, struggling to keep up with the production.
It's sort of a chicken and egg.
With most of the mines having production problems,
that's sort of just helping the demand side and not helping the supply side.
So, yeah, so that's the one side.
We do see that most of these mines are still doing extremely well, Harmony, year
to date.
Listen to this.
I mean, we're sitting on the 12th of February, and this is up to yesterday.
So this is one month and 11 days.
So we've got Angler Gold up 44.4%.
Goldfields up 42.5%. Just reiterate that.
Plus 40% in what time period?
That is 1 January 2025 up to yesterday's close.
I thought you were talking about January 2024 from that.
That's extraordinary.
It's crazy.
And then in Harmony, I know you like your Harmonies.
Harmony, 45.4% year-to-date up to yesterday.
So it's crazy, crazy levels.
But I had a look.
I had a look last night.
Now, there's two great indicators, and it's actually ETFs you can follow.
um exchange traded funds so so the one is etn is gld that's the most famous famous i
would say
etn in the world that's the gold gold etf that's where you want to buy the pure gold
in dollar terms and that
just tracks tracks that that the dollar dollar index if it's if it's trading if
the dollar is trading at three thousand
dollars that's pretty much you know what the gld will should be doing If you look
at that graph,
and I know you love your graphs, Lindsay.
I mean, naturally, because it's reaching new all-time highs every day,
it's no surprise that GLD is also naturally reaching new all-time highs.
You could see it somewhat.
I mean, according to some of these technical indicators, the RSI's and those
kind of things, it's somewhat overboard.
When I say somewhat, it is overboard.
But when I look back at gold, when it sort of… go crazy.
It goes really crazy and stays overboard sometimes for very, very long.
But that's where I want to get you.
So the next indicator is what they call the GDX or the gold miners
ETF. That's where they take all the miners in the world or biggest miners.
So it's an international index.
It's not just US gold miners.
Yeah.
No, it's international.
So you've got your Barrick Golds.
You've got you've got your Wheatons, you've got all the biggest mines in the
world.
And funnily enough, in the top 10, Anglo Gold and Goldfields also find themselves
in the top 10, you know, largest mines.
But if you take that same grove, it's not even close to reaching new all-time highs.
In actual fact, I think there was two or three periods over the past five years
where we'd
actually surpassed the current levels or traded higher than current levels.
So one or two things, you know, are happening here.
So the one is...
Mr.
Market is telling us, wait a minute, the gold price is not going to stay at these
current levels.
We're lurking through this hype.
Sooner or later, we're going to start seeing the dollar stabilize,
most probably strengthen a little bit with all these wonderful tariffs and policy
studies that it's going to implement.
And then we should see the dollar, the gold price retrace again,
which will sort of bring this in sync again.
The other one is they just lagged.
I know a lot of people said, Skoll, but you need to look at the all-in cost for
these mines.
You know, when these mines really, they didn't stay with inflation, for instance.
They've actually outgrown the pace of the all-in cost,
outgrown the pace that the gold price actually has grown with.
Yeah.
I know that, but this is nothing strange because if you look at it for the past,
let's call it 20, actually 30 years, and
I took some of these miners where I look at their all-in cost.
And every time you see the gold price pop, for that, let's call it three,
sometimes six quarters,
you will see three to six quarters.
You will see that all-in cost really pop as well.
When I say pop, it just goes crazy.
and that's just because and we've seen it today with with most of these miners
trading updates they want to
literally give every single person in a one kilometer radius they want to give
them a pick
or they want to give them a shovel they just need that gold to be distracted out
of the ground
25 hours a day that's what they want to do and they're happy to incur these extra
costs you
And I'm sort of exaggerating with giving everyone a pick because they invest in...
No, you've got to make hay while the sun shines, in other words.
You've got to take advantage of these because we know, even though you're
bullish, and even though it seems that nothing can go wrong,
something will go wrong eventually.
So you've got to take advantage of it.
And that's where hedging comes in, of course.
Maybe people are saying, that's it.
Look at a 10-year graph of gold.
We're nearly at 3,000, for goodness sake.
Let's put in a 30%, 40% hedge.
Let's get those futures or those options sold and see what happens.
Maybe that's part of the equation as well.
There's so many factors.
That is part of the equation.
But back to my all-in cost, what you've actually seen is that period, let's call
it for that,
when the gold price popped,
you'll see a three to six quarter period where they actually seriously grow their
all-in cost.
And that is where they actually go and expand and create more capacity.
capacity to mine this gold.
And then what you see, suddenly you start seeing the oil cost stabilize,
and in most of the cases actually start dropping off.
But the gold price actually don't.
It actually stays at these higher levels, and that's where they're actually doing
well.
Now we've already seen it in gold fields.
Now I know gold fields are also a special case.
They're struggling with that South American mines.
They're struggling with a little thing called a chinchilla.
Now, for the listeners out there, the chinchilla is just a beautiful, cute
little fuzzy rat.
I know people say it's not a rat.
It's just a beautiful little rodent.
What are the chinchillas doing to goldfish?
They were pretty much having havoc around that mine,
and it's now an endangered species around there.
And unfortunately, in that mining area, there's so many of these chinchillas.
Well, how can they be endangered if there's so many of them?
Well, that's what my problem is.
But apparently, they just sort of focus, and there's quite a few of them in that
area,
but not a lot in the rest of the world.
But again, I want to be very, very careful what I say now because I love these
little...
Fuzzy animals.
It looks like a, what do you call it, a rabbit without, it's just a beautiful
little, people,
$3,000 per ounce.
Come on.
Anyway, now they've been struggling.
There's plenty of fluffy rodents around.
Get the gold out of the ground for goodness sake.
We are going to be hammered.
You know that, Lindsay.
I mean, I'm just worried my daughter's going to listen to this.
Most probably she will ban me first.
Anyway, but you've seen gold fields.
They've mentioned that they went from $1,200, $1,300 per ounce.
Of course, they're all in cost, I would say, about 18 months ago.
And then they suddenly just started increasing to a point, that's a part of
last year, where they actually came out and said, well,
we're now standing at around about $2,000, $2,100.
And everybody said, well, that's the reason.
You know what?
That's the reason why.
why these mines i mean i mean you you've seen a growth in the gold price but the
oil cost also grown
50 now it's coming down i think it's run about the 1800 now um per ounce and with
the
gold price trading at close to three thousand dollars they
are printing money they are printing printing money like most of the other
miners out there so listeners out there i think
homework for tonight go onto your computer find a growth Go type in GLD.
Now, that's the gold ETN. And the other one you type in
GDX. Which is the minus one.
Yeah.
Okay.
That's the minus.
And just go look at the two graphs.
And I would just say, put that on your radar.
And let's have this conversation.
What is the correlation?
And keep this one brief because I knew when I said let's talk about gold, I could
go downstairs, make a cup of tea, come back up,
and you'd still be talking.
I didn't expect the chinchilla comments.
But anyway, Skulk, there must be a relationship when the two performances of
the physical gold price
and the gold miners start to diverge.
And one is a leading indicator, one is a lagging one.
What's your experience and what are they doing now?
The gold price is always the leading indicator.
That's the first one.
So, yeah, great correlation.
And, again, I run a relative graph.
I love my relative graphs.
I put a… relative graph with a mean and a standard deviation.
You can use one or two times standard deviation.
And when it's seriously, let's call it when the miners seriously underperform the
gold price to the point
where it's touching this, let's call it, bottom of this lower standard deviation, I
actually,
that tickles my fancy.
I would use that as an entry point going into the miners.
And inversely, the same story where you get...
the miners where they seriously outperform the gold price that's usually when you the
hype is really at his at his highest and and i don't
think that we'll see that now yet i think we're going to start seeing this in the
next it's got a two to three quarters when we
just mentioned it i mean the margins are really really well getting very good for
the for these miners they're sitting with no debt free
cash flow is fantastic and when these results start looking
as good as i think they're going to start looking then you might see the inverse
happening again anyway
As we always do, Skulk, I was going to talk about Aspen and the PIC increasing
its stake in Aspen to over
21%.
I think it is a massive stake.
They must know something or they must have very little else to entice them with their
huge amount of funds.
But I'm going to go straight to the spot markets now.
1855 is the dollar rand.
The British pound against the rand is 23 on the noggin.
And the euro rand.
is 19.18 euro dollar 103.40 and the british pound is 124 against the us dollar
right all important commodities now uh gold price down 24 000 announced now to
2889 uh platinum 1041 which is up 15.
uh palladium is three figures again 983 that's down four dollars on the day we
were talking about oil
earlier on so let's have a look at my crb index page
which shows brent crude oil uh down 1.4 percent to
75.84 and west texas 7207 which is down 1.7%.
Any other ones there really moving?
No, not much.
The S&P 500 futures.
A few chickens coming home to roost there.
Not too bad.
But the market, 6,050 odd, which is down around about two-thirds of a percent.
As you know, it's just updating.
It's now down...
Gosh, it's flashing all over the place.
Down around about 0.9%.
Call it 6039.
US 10-year Treasury bond yield is 4.66%.
The South African 10-year, it's not looking so great actually.
Where is that now?
4.
Sorry, 10.82 I think it is.
Oh no, 10.83 now, ahead of the budget which is on February the 19th.
And what else have I got here?
The Bitcoin price, which is doing nothing.
down one and three quarters percent 95 600.
um skulk any shares that caught your eye today other than the miners that we've
been speaking uh
extensively about no i think um yeah we mentioned about the trading update on
on uh
what statement on pan-african resources and then trellidor
i missed that You haven't seen it.
So Trinidad came out with a trading statement.
Just really, really looking extremely good.
I mean, earnings per share to rise up to 43%.
Headline expected to be 33% to 43% higher.
Now it's a small, small… It's a bit small for you, right?
It is a little bit too small, yes.
But it's a great… Great company.
It's really a great company.
I mean, we know it's one of those South African stores.
They mentioned that they're seeing strong performances, you know, from the UK
division, the Tralidor UK division.
And wait for it, Tralidor today, up 42.3%. How can that be?
Really?
Any volume there, or is it just people knocking it about a bit?
No, I wouldn't say it's the biggest volume, but remember, it's a small cap.
It's a company which...
there was the close at one round 75 yesterday and went up let's call 74 cents
and that 74 cents is uh
40 43 well close to 43 percent arise and and so all the the trellis all shell this
out there well
done i applaud you well done sticking with it yeah i've got um on the upside shares
that we would
recognize boxer that's had a nice day nearly five percent higher ab in bev up
nearly three percent in parlour platinum
Up 2.6%.
On AB InBev, I noticed in Amsterdam this morning, Heineken shares rose 13%.
They've got a share buyback, and they're also selling more of the beer that I can't
stand in places like
Mexico. I don't know why you drink Heineken when you've got Corona and Sol in
Mexico.
But anyway, that's just me.
I'm being disloyal here.
Impala Platinum, 2.6% up.
Downside, Pan African Resources, the aforementioned 7.6% weaker.
Xaro down 6.3%.
And a third.
DRD Gold down 5.5%, Alpha Min down 4.1% and Harmony down 2.4%.
So the downside five, all populated by the diggers.
What about the indices today, Skulk?
I'll give you the indices now.
I think one thing you mentioned was Boxer.
Great movement there today.
Well, great recent movement.
And it seems like if all goes well, I remember the rebalancing for these indices
usually happen in...
and the end of march so we've still got some time but if everything stays
unchanged then there's a
great great possibility that that boxer will be included in the all sea now if
they can be included in the
all z actually that would mean that most of these funds and trackers will need to
buy it and i
think this is sort of pre-empting i think that's one of the reasons why we've seen
is it the tracker funds that are buying ahead of time or is it the
people knowing that the trackers will have to buy it buying ahead of time that are
not involved in the trackers in other words the
sophisticated punters i would go
for yes okay now it won't be a trackers naturally that's that uh tracker naturally
implies that it should track the indice you can't include something uh that's
that's not so you
can't buy it and then bunging into the uh into the into the fund on the day that
boxer is included that that doesn't work like that
correct okay good so it will be the latter Righto.
Yeah, as I said, the indices, please.
So the JSC today closed.
So we actually found ourselves still positive.
End of the day, 87,942 points.
That's the JSC all share, 43 basis points in the green.
The resources took a bit of a breather with all these scores,
retracement of the gold miners and some of these other miners as well.
That was down 29 basis points.
Industrials, however, they were looking really good, up one point.
0.1%, so over 1%.
Financials also having a good day, 33 basis points positive,
while the asset property also had a solid day, 0.5% positive.
When you look at the value traded, not a bad day.
Seriously, not a bad day.
I mean, 22.3, close to 23 billion for today.
So we've been consistently eating this 20-plus billion mark.
per day.
I would say a good sign.
Very different to this time last year when we could barely get above 15, 17, 18
billion.
So yeah, suddenly some interest in South Africa.
Well done.
Okay, Skulk, thank you very much for your time.
As always, we shall reconvene next Wednesday.
Skulk Lowe is a Portfolio Manager at PSG Wealth Old Oak in Cape Town.
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