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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
May 8, 2025

Gold and Foreign Exchange Reserves

April 2025

The African International Liquidity Position, reflected by Net Gold and Foreign Exchange Reserves, grew in both USD and Rand terms as of April 2025. Despite a nearly 60c Rand depreciation against the dollar, reserves increased, boosted by a 4.7% rise in gold prices, which remain 41.4% higher than in 2024.

Foreign reserves also surged from December 2024, despite Rand volatility following President Trump’s re-election, diplomatic tensions, and US-China tariff disputes. Key commodities like gold, oil, platinum, and coal offer vital insights into South Africa’s mining sector and inflation outlook.

Monitoring these trends is crucial, as inflation expectations will influence the South African Reserve Bank’s (SARB) interest rate decisions later in 2025. A stable Rand and lower oil prices support favourable inflation forecasts, but global geopolitical tensions and potential changes to trade agreements like AGOA could cause rapid shifts.

With recent US tariffs and an unchanged Fed rate in May 2025, the Rand is expected to face continued volatility, impacting international markets and South Africa’s economic outlook.

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More Coverage

Producer Price Inflation

October 2025
In October 2025, producer price inflation rose to 2.9%, an increase from 2.3% in September. However, on a monthly basis, there was a slight decline in producer prices, down by 0.1%.

Retail Sales Performance

September 2025
Retail sales in South Africa rose by 3.1% in September, slightly exceeding market expectations of 3.0%, as anticipated by analysts for that month. This growth indicates a continuing recovery in consumer demand within the economy.

SARB Lowers Interest Rates as Stability Improves

The South African Reserve Bank (SARB) has taken a prudent and measured step by reducing its base interest rate from 7.0% to 6.75%, marking a significant moment in the country’s monetary policy trajectory. This decision, made by the Monetary Policy Committee (MPC), underscores the bank’s cautious optimism about South Africa’s economic outlook amidst a complex global backdrop.

Consumer Inflation

October 2025
In September 2025, the Consumer Price Index (CPI) saw a modest rise to 3.4%, slightly up from 3.3% in August, yet just below the analysts’ forecast of 3.5%.

Why Aluma does not Force an Interest Cut

Cautious Optimism Amidst Inflation and Reform Momentum
As the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) prepares to announce its interest rate decision later this week, market watchers are closely divided between expectations of a modest cut and maintaining the status quo. With approximately 70% of economists foreseeing a 25-basis point reduction from 7.00% to 6.75%, the prevailing sentiment reflects confidence in economic stabilization. However, a significant proportion remain cautious, suggesting that the SARB may choose to hold interest rates unchanged for another month, given the current inflation trajectory and recent developments in fiscal discipline.
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