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Gold is treating investors well

Gold has had a good run over the past few months – increasing from $1 820 per ounce in October 2023 to touch $2 080, before declining to the current price of just shy of $2 040 per ounce.

Ironically, the spurt from $1 820 to $2 080 per ounce mirrors the performance of the gold price from January 2023 to the end of December – an increase of nearly 11% for 2023.

More importantly, the gold price spent most of 2023 above $1 900 per ounce and happily above $2 000 for several weeks, compared to its range of around $1 800 for most of 2022 (with a couple of months below $ 1700 that year).

That the gold price was consistently higher during 2023 means that investors in gold, gold funds and gold shares fared very well during the year.

In fact, the best share on the Johannesburg Stock Exchange during 2023 was Harmony Gold, which chalked up a gain of 93%.

The JSE Overall Index delivered only 5.3% in 2023.

Investing in physical gold in the form of gold bars or Krugerrands, or by way of an exchange-traded fund (ETF) delivered better returns than a balanced portfolio of JSE shares, bonds and property over any investment term during the past few years.

For instance, Absa’s NewGold ETF rewarded investors with a massive 23% return during 2023, 11% per annum over three years and 15.4% per annum over five years.

This ETF invests only in physical gold, owning 12.5 tons of gold on behalf of investors at the end of December 2023.

Gold coins, such as Krugerrands, obviously mirrored the gold price too, as well as the exchange rate.

According to figures published by Cape Gold Coin Exchange, the price of a Krugerrand increased by 21% from R33 000 for a one-ounce Krugerrand at the end of 2022 to approximately R40 000 by the end of 2023. The price doubled in less than six years.

Gold shares shine

Because the return on investment in coins, bars and gold ETFs is solely driven by the price of gold at a given date, while that of gold shares is driven by the average gold price over the years, gold shares outperformed physical gold during 2023.

As mentioned, the gold price was consistently higher during 2023 than in 2022. In addition, the rand was consistently weaker. Thus, Harmony Gold nearly doubled from January to December 2023 while Gold Fields increased by 59%.

AngloGold Ashanti increased by only 5.3% because it had a good run during 2022 and started 2023 quite high.

DRDGold (the old Durban Roodepoort Deep) increased by 28% in 2023.

Unfortunately, the low platinum price was a drag on gold and platinum producer Sibanye-Stillwater. The share fell by 44%.

This is, however, less than the decline in Impalata Platinum (Implats), which fell nearly 60% in 2023.

Gold shares vs balanced fund

The better fortunes of gold producers are evident when comparing a portfolio of gold shares with a balanced fund.

The Old Mutual Gold Fund achieved a return of 36% during 2023, according to the fund’s fact sheet as at end December 2023. The fund’s two largest investments comprise AngloGold Ashanti and Gold Fields. It also holds a sizeable stake in Harmony Gold, with international gold mining companies making up the rest.

It is interesting to note that gold funds are solid performers overall.

As such, the Old Mutual Gold Fund outperformed its stable mate, the Old Mutual Balanced Fund, over every different investment term.

A comparison of the Old Mutual Gold Fund, its Balanced Fund and Absa’s NewGold ETF follows below.

Annual returns show gold wins
Per annum Old Mutual Gold Fund NewGold ETF Old Mutual Balanced Fund
One year 36% 23% 10.9%
Two years 40% 10.8%
Three years 12.6% 11%
Five years 24.8% 15.4% 9%
10 years 13.3% 14.6% * 7.4%
* Since inception in 2004

Source: Compiled from available data in Old Mutual and NewGold fact sheets.


The World Gold Council says in its latest monthly analysis of the gold market that the increase in the gold price during 2023 to solidly above $2 000 per ounce reflects strong demand for gold from most sectors.

“Another year of blistering central bank buying, together with resilient jewellery consumption, offset ETF outflows. Annual gold demand (excluding over the counter transactions) of 4 448 tons was 5% below a very strong 2022.

“Inclusive of significant OTC [over-the-counter] transactions and stock flows (398 tons), total gold demand in 2023 was the highest on record at 4 899 tons,” according to the organisation that monitors and promotes gold use.

“Central bank buying maintained a breakneck pace. Annual net purchases of 1 037 tons almost matched the 2022 record, falling just 45 tons short,” it says.

Global gold ETFs saw a third consecutive annual outflow, losing 244 tons, but the World Gold Council noted that the pace of outflows slowed “markedly” towards the end of 2023 with the only large sales during October damaging the overall figures.

It added that demand for gold by jewellery manufacturers maintained the better levels of 2022, despite higher gold prices.

The World Gold Council says that underlying fundamental factors remain bullish for gold in 2024.

“Total investment is likely to be higher in 2024 but, akin to the market behaviour last year, much of this demand could come from the less visible over-the-counter segment – which adds a level of uncertainty.

“Early continued weakness in global gold ETFs is likely to see a turnaround by mid-year, aided by anticipated rate cuts and continued geopolitical risk,” it adds.

“European ETF outflows are likely to continue until longer-maturity interest rates are on a firm path lower, but even here regional politics, alongside geopolitics, could shake things up.”


The organisation states that: “Bar and coin demand is likely to stay healthy and in line with the 10-year average, as Chinese and Indian demand strength offsets European weakness.”

It predicts that central banks will continue to buy gold “at an impressive rate, likely in excess of the pre-2022 annual average of around 500 tons”.

While jewellery demand might struggle if lower economic growth and high gold prices start to bite, lower inflation could make consumers start to feel wealthier in real terms, which could mitigate some of the drop in demand.

Demand for gold for use in technology is expected to benefit from the stronger trends and indications of continued growth in semiconductors and the growth in development of artificial intelligence.

Supply …

However, total supply is also expected to increase.

Planned expansions and the mining of higher-grade ore are set to increase primary production to new highs, although a downside risk from disruptions remains a factor, according to the analysis by the World Gold Council.

It says 2023 provided some positive surprises to the outlook at the beginning of the year, largely as a result of the risks of a US recession, continued weakness and asset volatility in China, and global geopolitical tension.

None of these have changed since then; in fact, most may have worsened.

For local investors, the outlook for the rand is as bleak as ever, as is the outlook for the JSE.

It will be difficult to sway gold bulls now.  –