Monday, Dec 29, 2008
South Africa’s rand rose against the dollar for a second day after the price of gold climbed to an 11- week high as mounting tension in the Middle East boosted the appeal of the precious metal as a safe haven asset.
Gold, which rivals platinum as South Africa’s biggest export earner, climbed to the highest level since Oct. 10 after Israel expanded its bombing of the Hamas-controlled Gaza Strip. The attacks raised concern oil supplies from the Middle East, which produces almost a third of the world’s crude, may be disrupted, prompting investors to purchase gold as a hedge against inflation.
“There’s quite a strong correlation between the rand and the gold price, and that’s helping the currency in a thinly traded market,” said Kimon Boyiatjis, a hedge-fund manager in Cape Town at Trident Capital. “South Africa is one of the world’s biggest gold producers, so a stronger bullion price is very positive for us from an export point of view.”
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The rand advanced as much as 1.5 percent to 9.5683 per dollar, the strongest level since Dec. 24. It traded at 9.5758 by 9:45 a.m. in Johannesburg from 9.7150 at the end of last week. It strengthened versus 10 of the 16 most-actively traded currencies monitored by Bloomberg, adding most against the Brazilian real. Against the euro it slipped 0.1 percent to 13.6432.
The currency may strengthen to between 9 and 8.60 per dollar “pretty swiftly,” according to Boyiatjis.
Gold for immediate delivery gained as much as 2.4 percent to $890.49 an ounce as Israel authorized the call-up of 7,000 army reservists, raising concern it may launch a ground invasion of Gaza. Bullion, which reached a record $1,032.70 an ounce in March, rose 3.7 percent last week, the third straight weekly advance.