Fall in Gold hurts the Rand - eeish!

Painfully hurting the Rand yesterday was a 4% fall in the gold price. This allowed UK sterling to capture the key technical resistance just above 11.50, which should open the way to further upside in the short term. The next noteworthy resistance level is 12.05.

The Sterling/Rand rate was given a second shot of adrenalin as world stock markets took a major dive last week, driven lower by fears of a Chinese and US slowdown. A string of negative US data including jobless claims and poor manufacturing numbers meant that US stocks closed at a new 8 month low last night, stoking fears of a deeper correction that could keep investors looking for safe havens over the near term. That sense of investor risk aversion sent the Rand sharply lower over recent days as traders sell high yielding currencies and move money into the Yen and US dollar, a phenomenon known as a "flight to quality". This reaction has been seen several times over the last few years. Every time the markets hit a major hurdle, the high yielders plunge. However, so far these currencies have always recovered to new highs against both sterling and the US dollar once the fog clears and investors renew their search for a decent yield (The Rand offers 6.5% compared to just 0.25% in the US and 0.5% in the UK).