US inflation data and ZAR weakness sees local gold shares rally towards targets
We update our view on the spot price of gold and its outlook, as well as highlight how a recent rally has narrowed and, in some instances, seen local mining counters exceed their longer term consensus price targets.
US Inflation and ZAR weakness sees local gold miners rally towards targets
Gold share price targets and broker ratings
In this article we update our view on the spot price of gold and its outlook, as well as highlight how a recent rally has narrowed and, in some instances, seen local mining counters exceed their longer term consensus price targets.
Spot gold renews expected correlation to inflation
Spot gold has extended its short term rally following the recent inflation print out of the US which showed Consumer Price Index data to have tracked significantly higher than consensus estimates had predicted. While gold has had a relatively subdued reaction to reflation in the world’s largest economy, the short term moves sees its broadly expected correlation to inflation data return.
Spot Gold – technical view
The medium to long term trend for gold remains sideways in nature, with a broad range considered between levels 1680 (support) and 1960 (resistance) respectively.
In the short term we have seen gold pushing above our 1840 resistance target. The close above this level now sees 1875 and 1910 respectively as further upside targets from the move. Traders who have been long might consider trailing their stop loss levels to a close below the two day low at around 1830.
Gold share price targets and broker ratings
The table below shows locally listed gold counters, highlighting long term price targets and broker ratings as of the 25th of October 2021 and sourced from Refinitiv Workspace.
| Company | LT Broker Rating | No. of Brokers | LT Target Price | Share Price | Discount/ Premium to Target |
|---|---|---|---|---|---|
AngloGold |
HOLD |
11 |
339.65 |
292 |
-13.51% |
Gold Fields |
BUY |
9 |
165.22 |
145 |
-12.17% |
Harmony |
HOLD |
8 |
58.86 |
59 |
-0.42% |
DRD Gold |
HOLD |
1 |
15.50 |
14 |
-11.94% |
Pan African Resources |
BUY |
3 |
28.67 |
17.38 |
-39.37% |
The updated table below shows locally listed gold counters, highlighting long term price targets and broker ratings as of the 11th of November 2021 and sourced from Refinitiv Workspace.
| Company | LT Broker Rating | LT Target Price | Share Price | Discount/ Premium to Target |
|---|---|---|---|---|
AngloGold |
HOLD |
335.75 |
315.85 |
-5.93% |
Gold Fields |
BUY |
164.44 |
154.69 |
-5.93% |
Harmony |
HOLD |
55.57 |
57.78 |
3.98% |
DRD Gold |
HOLD |
15.50 |
14.66 |
-5.42% |
Pan African Resources |
BUY |
28.66 |
19.20 |
-33.01% |
The new table highlights how gold miner share prices have now narrowed the gap and, in some instances exceeded their respective long term price targets. Local counters have benefited from both a sharp rise in gold and short term depreciation of the rand.
Harmony continues to carry a hold rating, but now trades firmly above what is deemed a longer term fair value by analysts.
Pan African Resources continues to trade at the deepest discount to a longer term price target, although it should be remembered that the smaller cap counter finds far less analyst coverage than its sector peers.
In summary:
Dollar denominated gold has extended a short term rally post US inflation data
The short term momentum suggests 1875 as the next upside resistance target
The rally in gold miners has narrowed the gap to long term analyst price targets for AngloGold, Gold Fields, DRD Gold and Pan African Resources
Harmony now trades above what is deemed a longer term fair value
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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