Rand Gains as Gold Surges to Record; Retail Sales Slump Eases

By Garth Theunissen

Nov. 18 (Bloomberg) -- The rand strengthened as the price of gold surged to a record and a government report showed the contraction in retail sales slowed as South Africa’s first recession in 17 years eased.

The currency of Africa’s biggest economy gained as much as 0.7 percent to 7.4201 per dollar and traded 0.5 percent stronger at 7.4392 by 11:53 a.m. in Johannesburg, from a close of 7.4738 yesterday.

Gold, which rivals platinum as South Africa’s biggest export, rallied for a fourth straight day, rising as much as 0.9 percent to an all-time high of $1,147.72 an ounce. A report showed retail sales shrank an annual 5.1 percent in September, compared with a revised 6.5 percent contraction the previous month, the Pretoria-based statistics office said.

“Gold and commodity prices in general are benefiting from a weaker dollar and that’s positive for the rand, which is still seen as a major commodity play,” said Natheem Alexander, a bond and currency trader in Cape Town at Peregrine Quant. “The fact that the slowing trend in retail sales is easing up a bit is definitely a positive signal.”

Bullion, which along with platinum accounts for about 22 percent of South Africa’s export earnings, has surged more than 30 percent this year as central banks, pension funds and individual buyers seek to protect their wealth against a weaker dollar and inflation. The Dollar Index, which tracks the U.S. currency against six major counterparts, has lost 7.5 percent this year, boosting commodities that are priced in dollars.

Government bonds fell in South Africa, with the price of the benchmark 13.5 percent security due September 2015 losing 6 cents to 123.20 rand. The drop pushed up the yield by less than half a basis point to 8.37 percent.

South Africa’s currency also strengthened versus half of its 16 most actively traded counterparts, appreciating most against the Taiwanese dollar. Against the euro it lost 0.2 percent to 11.1138, from yesterday’s close of 11.0956.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net