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The Citizen
3 hours ago
- Business
- The Citizen
Weekly economic wrap: Bad news for oil prices, rand soldiers on
While the week was uneventful on the local economic front, the same cannot be said for the international picture for oil prices. As expected, the week brought bad news for oil, but thankfully not such bad news for the rand as Israel and Iran entered a full-blown war after Israel struck Iran's nuclear facilities last week. Closer to home, inflation remained the same in May, while retail sales showed a solid performance in April. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), points out that so far none of the global superpowers has directly become involved in the Israel-Iran war, with US president Donald Trump saying that he will decide in the next two weeks what to do, although he already approved attack plans. 'In commodity markets, there is good news with a higher platinum price and bad news with a higher oil price for South Africa's trade dynamics. The platinum price jumped to a more than 10-year high this week, supported by demand from China, sustained investor interest and concerns about a deficit in the market, with demand outstripping supply. 'On a negative note, the oil price surged higher this week and is currently almost 20% above the price at the start of the month. Iran directly supplies about 3 million barrels of oil to the market per day, and this could technically easily be made up by a country like Saudi Arabia, which is still voluntarily cutting back production. 'However, the real concern is that freight in the Strait of Hormuz, which channels about 15% of the world's oil and 20% of liquid natural gas, is disrupted. Oil continues to flow, but prices to charter large oil tankers sailing through the strait have already more than doubled from last week.' ALSO READ: What Israel–Iran conflict means for South African economy Oil prices surge as Israel-Iran war heats up Bianca Botes, director at Citadel Global, agrees that the recent outbreak of war between Israel and Iran has significantly unsettled global energy markets, with profound implications for oil prices, the global economy, and Middle Eastern power dynamics. 'This escalation triggered immediate volatility in oil markets, with Brent Crude and West Texas Intermediate (WTI) prices surging by over 4% from the start of the conflict, seeing Brent reaching around $76/barrel and WTI surpassing $75/barrel. Since the start of the conflict, oil futures have risen approximately 10%, reflecting market anxiety over potential supply disruptions. 'Iran is OPECʼs third-largest oil producer, extracting about three million barrels per day. Despite sanctions limiting its exports, Iran remains a significant player, especially in supplying China and India. The conflict threatens Iranian oil production and shipping routes, notably the Strait of Hormuz.' Botes points out that analysts warn that oil prices could spike to $100 per barrel or even $120 per barrel if supply through the Strait of Hormuz is disrupted. 'Such a price shock would reverberate through global markets, impacting inflation, consumer costs, and economic growth worldwide. 'Brent Crude Oil futures fell below $73/barrel, but are still set for a third consecutive weekly gain. Fears of supply disruptions due to the ongoing conflict supported prices, even as Iran continues to export crude at high levels. A sharp drop in US crude inventories earlier in the week also helped keep oil prices elevated.' She says gold prices dropped below $3 360/ounce, nearing a one-week low and heading for their first weekly decline in three weeks. 'Investors have been selling gold to cover losses in other markets, and the prospect of no or gradual interest rate cuts limited gold's appeal.' ALSO READ: Israel vs Iran: Why you may soon have to pay more for petrol in South Africa The rand soldiers on De Schepper says the rand exchange rate held up well during the week, but depreciated slightly against a stronger dollar on Thursday and closed the week weaker against the dollar, euro, and pound. Botes notes that the rand is bouncing between R17.90/$ and R18.10/$, showing a slight weakening trend since its recent rally. 'The rand's performance was largely influenced by global risk sentiment and fluctuations in commodity prices. 'Compared to other emerging market currencies, the rand has held up well in recent sessions, despite ongoing uncertainty in global markets and the impact of international developments on investor appetite for risk assets.' Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, point out that the rand broke through R18/$, dropping to its lowest level since the second week of May as global risk aversion spiked and investors dumped emerging market assets. 'The local currency touched R18.15/$ on Thursday evening before recovering to around R18.01 this morning, down 1.2% from R17.80 on Monday.' The rand was trading at R17.99/$ this afternoon. ALSO READ: Inflation unchanged in May at 2.8% as economists expected Inflation remains at 2.8% in May According to the latest release from Statistics SA, inflation stayed below 3% in May at 2.8%, the same as in April. The largest contributions came from food and non-alcoholic beverages, which increased by 4.8%, primarily driven by higher meat prices. Katrien Smuts, economist at the BER, says while the recent foot and mouth disease outbreak put pressure on red meat prices, it was not the sole driver. 'Prices were already trending upward for several months and some analysts suggest the impact may be short-lived. Outbreaks often lead to export bans, which can increase local supply and place downward pressure on domestic prices. 'The ban on poultry imports from Brazil, due to an avian influenza outbreak, is expected to be temporary and limited to affected areas. While Brazil is a key poultry supplier to SA, the impact is also only expected to be short-lived.' Nkonki and Matshego say inflation remaining steady at 2.8% in May was in line with market expectations but higher than their 2.3% forecast. 'The primary contributor was food prices, although increases in housing, utilities and alcoholic beverages also played significant roles. Despite ongoing downward pressure from fuel prices, persistent price increases in other sectors shaped the overall inflation landscape.' Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, note that fuel prices dropped sharply, but warn that risks from a weaker rand and rising global oil prices could reverse this trend. 'Despite current disinflation, geopolitical tensions and trade uncertainty ahead of the July Monetary Policy Committee (MPC) meeting suggest that the South African Reserve Bank (Sarb) will likely maintain a cautious stance and hold rates.' ALSO READ: China's clever trade deal with Africa – removal of tariffs on most goods Increase in retail sales in April, but motor trade decreases Statistics SA's latest retail trade sales data showed another solid performance in April, with sales increasing by 0.9% compared to March and 5.1% compared to a year ago. The main driver of growth was the general dealers' category, which increased by 5.3%. Despite another steep annual decline of 6.5%, wholesale trade sales perked up by 0.9% compared to March. However, motor trade sales decreased by 1% compared to March and by 0.9% compared to a year ago. Smuts says while the muted inflation print provides some welcome relief and April retail sales showed the consumer has some strength, the question is how long this can be sustained. 'Real incomes are squeezed amid unchanged personal income tax brackets, a pending electricity tariff hike in July and an increase in the fuel levy.' Nkonki and Matshego expect the upward momentum in retail sales to continue, supported by rising real incomes, subdued inflation, continued withdrawals of contractual savings and lower debt servicing costs compared to a year ago. Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano point out that despite April's strong performance, retail activity over the past three months remains 0.5% lower compared to the preceding three-month period, suggesting that household spending may be losing momentum. 'The spike in annual sales likely reflects holiday-related spending and two-pot pension withdrawals coinciding with the new tax season.'
IOL News
3 days ago
- Business
- IOL News
Gold dips despite escalating Israel-Iran conflict as volatility looms
Gold, traditionally a safe haven for investors, has seen its value drop below $3,400 amid rising tensions between Israel and Iran. Experts warn of increased market volatility as geopolitical conflicts unfold. Image: File photo Gold – the metal investors flee to in times of turmoil – slipped below its Friday close on Tuesday even as the conflict between Israel and Iran escalated and market watchers warned of more volatility. The precious metal, long seen as a safe place to store money, was trading at around $3,394.49 as of lunch time on Tuesday, down 0.08% on its opening price. Andre Cilliers, currency strategist at TreasuryONE, said in a note that gold had dropped below Friday's close of $3,450 level despite these geopolitical tensions. The metal is still off its $3 500 record high in April. Cilliers said that US President Donald Trump's warning to Iranians to evacuate Tehran has raised fears of an escalation in the Iran/Israel conflict and is keeping markets on edge. 'Iran has warned that it will unleash the biggest ballistic missile attack on Israel in the next few days while Israel is targeting government facilities,' he noted. Bianca Botes, director at Citadel Global, has also cautioned that there may be 'heightened volatility as markets react to fast-moving developments in the Middle East.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Information from axi indicated that gold was worth just under $19 an ounce in the years between 1833 and 1849, only moving above $1,000 in 2010. It stated that gold rose dramatically in January 1980, 'reacting not only to high inflation but also to geopolitical tensions with the Iranian Revolution and the Soviet Invasion in Afghanistan'. During the Global Financial Crisis of 2008, the metal soared more than 50% in just nine months to $1,011 an ounce. Concerns over the economic impact of the COVID-19 pandemic pushed the metal past $2,000 and it pushed higher again in 2023 when central banks started a rate-hiking cycle. On Monday, the rand closed 1.7% stronger at R17.81, even though trade was thin due to the holiday. It opened at R17.82, and was trading at R17.83. Cilliers expected a range of R17.70/R17.90 as traders watch the Middle East developments. IOL
IOL News
3 days ago
- Business
- IOL News
Gold dips despite escalating Israel-Iran conflict as volatility looms
Gold, traditionally a safe haven for investors, has seen its value drop below $3,400 amid rising tensions between Israel and Iran. Experts warn of increased market volatility as geopolitical conflicts unfold. Image: File photo Gold – the metal investors flee to in times of turmoil – slipped below its Friday close on Tuesday even as the conflict between Israel and Iran escalated and market watchers warned of more volatility. The precious metal, long seen as a safe place to store money, was trading at around $3,394.49 as of lunch time on Tuesday, down 0.08% on its opening price. Andre Cilliers, currency strategist at TreasuryONE, said in a note that gold had dropped below Friday's close of $3,450 level despite these geopolitical tensions. The metal is still off its $3 500 record high in April. Cilliers said that US President Donald Trump's warning to Iranians to evacuate Tehran has raised fears of an escalation in the Iran/Israel conflict and is keeping markets on edge. 'Iran has warned that it will unleash the biggest ballistic missile attack on Israel in the next few days while Israel is targeting government facilities,' he noted. Bianca Botes, director at Citadel Global, has also cautioned that there may be 'heightened volatility as markets react to fast-moving developments in the Middle East.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading Information from axi indicated that gold was worth just under $19 an ounce in the years between 1833 and 1849, only moving above $1,000 in 2010. It stated that gold rose dramatically in January 1980, 'reacting not only to high inflation but also to geopolitical tensions with the Iranian Revolution and the Soviet Invasion in Afghanistan'. During the Global Financial Crisis of 2008, the metal soared more than 50% in just nine months to $1,011 an ounce. Concerns over the economic impact of the COVID-19 pandemic pushed the metal past $2,000 and it pushed higher again in 2023 when central banks started a rate-hiking cycle. On Monday, the rand closed 1.7% stronger at R17.81, even though trade was thin due to the holiday. It opened at R17.82, and was trading at R17.83. Cilliers expected a range of R17.70/R17.90 as traders watch the Middle East developments. IOL
The Citizen
13-06-2025
- Business
- The Citizen
Weekly economic wrap: Dramatic jumps for gold and oil
Missiles and drones raining on Iran from Israel had an immediate effect on the global and local economy, with the prices of oil and gold increasing. Bad news about the South African economy was overshadowed by the end of the week with Israel's attack on Iran that immediately sent the prices of gold and Brent Crude Oil rocketing as investors invested in the safe haven of gold and fears escalated of disruption in oil supply. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), says the economic story for the week was initially relatively positive, with the overarching narrative that the US and China agreed on a trade truce. 'However, overnight, Israel struck Iran's nuclear facilities and military sites and killed senior commanders in dozens of strikes. While Israel attacked Iran before, this is the first time nuclear facilities were purposefully targeted, with those being 'at the heart' of the operation, according to Israeli Prime Minister Benjamin Netanyahu.' She points out that the oil price spiked by more than 4% to a two-month high amid concerns of renewed unrest in the Middle East mid-week, but came off those highs when a risk-off mood returned in global markets. 'This morning, Brent Crude futures jumped by 12% to about $78/barrel. Currency markets settled following an initial knee-jerk reaction after the news of the attack broke. The extent of the retaliation will determine much of the market and global reaction. The US was quick to state it was not involved and warned Iran not to target the US.' ALSO READ: Economic activity picked up for the first time in 8 months in May Dramatic jump for oil and a substantial rally for gold Bianca Botes, director at Citadel Global, also noted that the price of Brent Crude Oil, the global benchmark for petroleum prices, jumped dramatically to approximately $76 per barrel this morning, its strongest level since February. 'This sharp increase occurred after Israel's surprise military attack on Iran overnight, which created serious concerns about potential oil supply interruptions across the global market. The situation escalated when Israel announced a state of emergency, indicating that Iranian retaliation against Israeli locations could happen soon.' She says this development raised fears about a wider regional war that could affect the Strait of Hormuz, a critical waterway that handles roughly one-fifth of the world's oil transport. Botes points out that gold prices experienced a substantial rally, climbing over 1% to surpass $3,440/ounce in the early hours of this morning, nearing all-time highs as investors seek safe haven assets. 'The precious metal's surge directly followed Israel's military action against Iran, with Israeli Prime Minister Benjamin Netanyahu confirming that the strikes targeted Iran's nuclear facilities while acknowledging Iran's continued ability to respond. 'Beyond the Middle Eastern conflict, gold received additional support from uncertainty surrounding American trade policies. President Trump's threats to implement unilateral tariffs on trading partners created further market anxiety, although US Treasury Secretary Scott Bessent suggested the current 90-day tariff suspension might be extended.' ALSO READ: Structural reform is silver bullet needed for SA economy to grow – OECD Oil price highest since April, gold jumps 3.2% for the week Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, note that Brent Crude Oil is hovering around $72.43 a barrel this morning, its highest level since 3 April, up by 5% since Friday last week. 'Oil prices were already under increasing pressure early in the week on reports that the US-Iran nuclear talks had deadlocked. 'Gold has jumped by 3.2% for the week to $3 418 this morning, while platinum is down by 1.7% overnight after strong investor demand briefly propelled it through $1 300 an ounce on Thursday.' ALSO READ: R26 billion rescue from World Bank: Can the loan save Eskom and Transnet? Rand folds under the pressure of possible war in the Middle East Botes says the rand experienced significant pressure during trade on Thursday and early this morning, coming off its recent highs and resuming a sideways trend. 'The weakness in the rand is largely driven by the rebound in the dollar, while increased geopolitical tension and renewed trade tensions drove flight to safe-haven assets.' Nkonki and Matshego, say the rand dropped sharply overnight, breaking through R18/$ as global risk aversion jumped after Israel bombed Iranian nuclear sites. 'The assault added to the tensions that simmered early in the week after the US and Iran failed to reach an agreement on Iran's nuclear programme with the 60-day deadline stipulated by US President Donald Trump. 'The rand is trading around R17.96/$ this morning, its weakest level since 30 May. It touched R17.69/$ on Tuesday, its highest level since the second week of December, buoyed by investor demand for higher-yielding assets.' The rand was trading at R17.91/$ on Friday afternoon. ALSO READ: Manufacturing output falls sharply and unexpectedly in March Manufacturing production worse than consensus forecast According to Statistics SA, manufacturing production decreased by 6.3% in April, after a downwardly revised 1.2% decrease in March. Nomvelo Moima, economist at the BER, says the headline figure came in worse than the consensus forecast, which anticipated a 4.5% decline in output. Weakness was reported across the board, with nine out of the ten main subsectors contracting. The biggest drags on annual output came from food and beverages (-7.6%), metals and machinery (-6.3%) and motor vehicle parts and accessories (-13%). However, she says, on the positive side, seasonally adjusted manufacturing production increased by a better-than-expected 1.9%, up from a 2.5% decline in March. 'April marked the sixth consecutive annual decline in manufacturing output, consistent with the Absa PMI, which remained in contractionary territory over the same period. 'Therefore, a further decline in May's PMI suggests we could see another month of lacklustre activity in the manufacturing sector.' ALSO READ: Manufacturing experts urge SA to turn more raw materials into products Better start to the year for manufacturing production despite decline Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say despite the decline, it is nonetheless a moderately better start to the second quarter of 2025, although the persistent annual decline underscores ongoing unfavourable operating conditions and is consistent with their assessment of downside risks to the near-term economic growth outlook. Nkonki and Matshego say the contraction in manufacturing production steepened in April, with output falling by 6.3% from -1.2% in March. 'The sharper drop in output was driven by the increase in public holidays this year compared to 2024. Nonetheless, the sector continues to struggle due to inefficiencies in the logistics network and subdued domestic and global demand. 'These circumstances have led to ample spare capacity, high operating costs and weak commodity prices.' ALSO READ: SA's shrinking mining sector and the policies that brought us here Bigger than expected contraction in mining production Mining activity also revealed a downside surprise compared to the consensus expectation of a -4% decrease. According to Statistics SA, annual mining output plunged by 7.8% in April, down from an upwardly revised 2.5% contraction in March. The biggest drag came from a fall in the production of platinum group metals (-24%) followed by gold (-2.5%) and coal (-1.7%) which both shaved off -0.3% percentage points from the annual figure, while iron ore made the largest positive contribution to output (+5.3%). Moima says on a positive note for quarterly gross domestic product (GDP) dynamics, mining production ticked up by 0.6% month-on-month, after a 3.6% increase in March. Nkonki and Matshego point out that the contraction in mining continued for a sixth consecutive month in April, registering a sharper decline of 7.7% from -2.8% in March. 'More public holidays in April this year, combined with the struggles on the logistics front and subdued commodity prices, contributed to the weakness.' Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say the contraction in mining production marks the sixth consecutive month of annual decline. 'The outcome was worse than the Bloomberg consensus forecast of a 4.0% decline and largely reflected the disruptive impact of breakdowns and third-party supply issues affecting platinum group metals.
News24
10-06-2025
- Business
- News24
Rand shines against dollar, pound
For more financial news, go to the News24 Business front page. The rand strengthened to below R17.70/$ late on Tuesday, reaching levels last seen in October 2024. The local currency hit R17.6702, before retreating slightly to R17.70 in early evening trading. It has gained almost three percent over the past month. As recently as in April, the rand traded above R19.90/$ amid fears of a DA exit from the government of national unity (GNU). At the time, the rand was also hurt by a global sell-off of riskier assets amid the turmoil unleashed by US President Donald Trump's trade tariffs. 'Much of the rand's strength is due to a combination of improved domestic sentiment and external tailwinds,' says Bianca Botes, director at Citadel Global. 'The South African Reserve Bank's (SARB) strong stance on inflation, fiscal optimism following budget clarity, and inflows from foreign investors have all contributed to a more supportive environment for the currency.' SA's 10-year bond yield fell below 10% for the first time since 2022, signalling growing investor confidence, she adds. Apart from calm returning to the GNU and the friendly reception of Budget 3.0, the SA Reserve Bank's campaign to lower the inflation target to 3% (from a band of 3% to 6%) has bolstered the rand and bonds. Lower inflation will be positive for both assets, but a stricter target would also require stricter monetary policy. High interest rates make rand assets attractive to foreign investors looking to earn yield. Meanwhile, US rate expectations and easing inflation fears are shifting, with the Fed now only expected to delay its rate cut to September. On Tuesday, the rand also strengthened against the pound, reaching R23.87 — around its best levels since the start of April. Sterling slipped after new UK jobs data implied further weakness in the labour market, which could influence how quickly the Bank of England cuts interest rates. British wages rose by a slower-than-forecast 5.2% in the three months to April, pushing sterling down 0.4% against the dollar to $1.3499. The labour market data "puts a question mark on the hawkish bias that we've seen from the Bank of England," Danske Bank FX analyst Kirstine Kundby-Nielsen said. The BoE is due to meet next week and is expected to keep the interest rate unchanged. Money market traders are pricing in about 48 basis points of cuts by year-end, up from about 39 bps before the data. The dollar index, which measures the US currency against six others, was flat to slightly lower at 98.95, not far from a six-week low of 98.35 it touched last week. The index is down 8.7% this year as investors, worried about the impact of tariffs and trade tensions on the US economy and growth, fled US assets and looked for alternatives. Trade talks Traders were waiting for the outcome of talks between Beijing and Washington, which on Tuesday continued for a second day, amid expectations of a trade deal that could further ease trade tensions. Officials from the world's two largest economies were meeting in London to try to defuse a dispute that has widened from tariffs to restrictions over rare earths. "The dollar was better bid last night in Europe and Asia and it has come off here so I think we're consolidating," said Marc Chandler, chief market strategist, at Bannockburn Forex in New York, until an outcome from the trade talks is announced. He added that what's at stake in these negotiations are not just tariffs, but also export controls, and "that's going to be the basis for the quid pro quo." Chandler noted that there are the makings of a deal: US semiconductor chips for China's magnets and rate earths. But what should be noted, he said, is the asymmetry. "China can replace the chips that the US exports easier than we can replace their magnets and processed earths." US President Donald Trump and his Chinese counterpart Xi Jinping spoke by phone last week at a crucial time for both economies as signs of strain emerge from the former's cascade of tariff orders since January. Investor focus this week will be on the US consumer price index report for May, due on Wednesday. The report could give insight into the impact of tariffs, with investors wary of any flare-ups in inflation ahead of the Fed's policy meeting next week.
