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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
December 6, 2024

South African Gold and Foreign Exchange Reserves

November 2024

In 2024, South Africa’s International Liquidity Position showed a decline in U.S. dollar reserves but a slight increase in rand terms due to the rand’s depreciation. Gold reserves dropped following a 4.5% price decrease, though prices remain significantly higher than last year. Key commodities provide insights into inflation and potential interest rate decisions by the South African Reserve Bank in January 2025. However, the return of former President Trump may create volatility for the rand amid potential shifts in economic policy.

The African International Liquidity Position, reflected in the Net Gold and Foreign Exchange Reserves, saw a decline in U.S. dollar terms but a modest increase in rand terms for November 2024. Despite a slight drop in the dollar value of reserves, a 20-cent depreciation of the rand against the dollar enhanced the rand value of these reserves. Gold reserves decreased in both rand and dollar terms due to a 4.5% monthly drop in gold prices; however, the dollar price remains 30.6% higher than in the same period in 2023.

Foreign exchange reserves significantly increased from October 2024, despite minor rand depreciation following the re-election of former U.S. President Trump. Key commodities for South Africa, including gold, oil, platinum, and coal, provide valuable insights into the mining sector, 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 interest rate decisions for January 2025 and beyond.

In November, the gold price dipped slightly, influenced by the U.S. presidential election and potential de-escalation in tensions in Eastern Europe and the Middle East after Trump takes office again in January. Coal and international oil prices remained relatively stable, while platinum declined by approximately $40 per ounce.
A stable rand and stable oil prices favour positive inflation expectations and future interest rate decisions in January 2025. However, the situation could change rapidly; further escalation in the Middle East may increase international oil prices and lead to rand depreciation.

It’s important to note that the rand may remain soft and volatile in the coming weeks, particularly with Trump’s return to the White House in January 2025. His protectionist economic policies and potential foreign policy shifts could impact the rand’s performance in the near term.

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