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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
October 7, 2024

South African

Gold and Foreign Exchange Reserves

September 2024

In a rapidly evolving global economy, understanding the dynamics of South Africa’s International Liquidity Position and commodity markets has never been more crucial. As we navigate rising inflation, fluctuating currency values, and geopolitical uncertainties, the implications for investors, businesses, and policymakers are profound. Discover how the recent trends in gold, oil, platinum, and coal are shaping the economic landscape and what the future holds for the rand and the broader South African market. Join us as we delve into the latest data and insights that could impact your financial decisions and strategies in the months ahead.

The South African International Liquidity Position, specifically the Net Gold and Foreign Exchange Reserves, showed further improvement in dollar terms during September 2024. The rand value experienced a slight decrease due to the rand appreciating against the U.S. dollar. Gold reserves increased in both rand and dollar value from August to September, driven by a nearly 3.7% rise in gold prices.

Foreign exchange reserves declined slightly in dollar terms during August, with a more notable decrease in rand terms, particularly as the rand appreciated by 42 cents against the dollar in September.

Several commodities of interest for South Africa include gold, oil, platinum, and coal. These commodities provide insights into the prospects for mining, fuel prices, and future inflation. Understanding these trends is crucial, as inflation expectations will influence the South African Reserve Bank’s Monetary Policy Committee (MPC) in its forthcoming interest rate decisions.

In September, the rise in gold prices was attributed to escalating risks associated with the conflict in the Middle East, as investors traditionally flock to gold during periods of uncertainty. Meanwhile, platinum prices also increased, oil prices edged slightly lower, and coal prices remained relatively stable from August to September.

The increases in gold and platinum prices are encouraging for the mining industry, while the stronger rand and lower oil prices are positive signs for inflation expectations and upcoming interest rate decisions. However, this situation could change rapidly; any further escalation in the Middle East could drive international oil prices higher and lead to a depreciation of the rand. During times of heightened uncertainty and conflict, investors often retreat from emerging markets.

A scenario involving a weaker rand and rising energy prices may compel the MPC to adopt a more hawkish stance regarding inflation expectations and interest rate decisions in the medium term.

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