Gold prices increase and push up international reserves

12 August 2013 - Which Way To Pay

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Increase in gold prices pushes international reserves up

South Africa’s gross international reserves have been pushed up to $47.3 billion in July from $46.9 billion in June due to gold price movements as an economic driver. This is the first upward movement recorded since the beginning of the year.

"The bulk of the change in gross reserves can be ascribed to an upward revaluation of gold reserves by $500-million to $5.3-billion. This boost stemmed from the rise in the international gold price between June and July," Investec economist Kamilla Kaplan said on Wednesday.

Fluctuation of the US dollar against major currencies

"At the current level, gross reserves stand at 6.3 months of import cover, down from 6.7 months of cover recorded in May," Nedbank economist Johannes Khosa said. The Reserve Bank said the increase in the gross reserves largely mirrored valuation adjustments originating from the noteworthy increase in the US dollar price of gold and the fluctuation of the US dollar against major currencies. "Over the month, the gold price gained 10.4% to $1,321 an ounce," Mr Khosa said.

The Nedbank Group Economic Unit said that the rand value of gross reserves declined marginally over the month. The rand gained 0.9% to R9.906 against the US dollar as speculation that the US Federal Reserve was about to temper its bond purchase programme dominated markets over the month. The Nedbank Group said the Reserve Bank will continue to focus on balancing growth and inflation prospects. "Recent indicators suggest that the local economy is struggling to pick up momentum and that demand-driven inflation remains contained. However, risks to the inflation outlook are still on the upside. This, along with the poor economic growth outlook, is likely to persuade the Reserve Bank to maintain its accommodative monetary policy stance well into 2014."

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