There's Less Gold at the End of this Rainbow (South African Rand)

Pretoria,

South Africa's gold and foreign-exchange reserves dropped from $33,6-billion to $32,1-billion in October, as the rand weakened and gold prices fell, the central bank said on Friday.

"It is to be expected that significant changes in the value of the United States dollar and the dollar price of gold will from time to time lead to sizeable valuation impacts," the Reserve Bank said in statement on 8 November.

South Africa is plummeting its reserves to prop up a Rand that is under seige by a higher dollar and yen, part of a basket of currencies it floats against.  Net foreign-currency holdings decreased to $29,97-billion, a $900-million drop, the Central Bank say.  Gold reserves fell to $2,943-billion, down $616-million.

Incredibly, the rand has lost about 46% of its value against the dollar this year. The dollar's gains serve to weaken the value of reserves that South Africa holds in other currencies.

Falling gold prices have also hit the value of South Africa's reserves. Gold traded at more than $900 an ounce in January, but on Friday afternoon was quoted at $741,60 an ounce in Johannesburg.  Clearly the safety sought in this storm is the US "greenback."

Gold is South Africa's biggest foreign-currency earner. In 2007, China surpassed South Africa as the world's biggest gold producer.  Long term, these trends should reverse, we hope, in mean time, hang on, it's gonna be a bumpy ride.

 

 

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