Gold’s wild ride from all-time high prices in January to another fierce rally last month has been a major boon for the South African economy, as it has offset potential negative capital outflows caused by rising oil prices with much higher gold export revenue.
The gold spot price was trading at about $4,335 per ounce midweek, or about R70,438.88 in South African rand. The World Gold Council’s senior quantitative analyst, Johan Palmberg, showed in a report that a rally in August took gold up 13% to end the month at $4,563/oz. This was the third-highest monthly return in a quarter century, narrowly short of the 14% observed in January 2026.
This followed the London Bullion Market Association’s average of $4,506.29/oz in the second quarter, a price that was 8% lower than the Q1 record but 37% higher than the average for the second quarter of 2025.
The price swings have not been affected by global gold supply, which held steady at 1,269 tonnes in the second quarter. This was after a 2% year-on-year increase in global mining production offset a 6% year-on-year decline in recycling, as lower quarter-on-quarter gold prices discouraged the selling of old gold jewellery.
The question might be asked: what does this all have to do with South Africa, which currently ranks only 11th or 12th in the world in terms of gold production? This is in contrast to its position as the world’s biggest-producing country through most of the last century.
Izak Odendaal, an Old Mutual Investment Wealth strategist, says that gold remains an important contributor to South Africa’s export revenues. The country is the world’s largest platinum-group-metals producer, and these prices have followed gold higher. This has boosted the profitability of miners, lifted their share prices on the JSE and filled the government’s coffers with tax revenue.
Harmony Gold Mining Company, for instance, one of South Africa’s largest gold producers, reported a 102% rise in headline earnings to $800 million for its financial year to 30 June. The dividend payout was a record R8.1 billion, up from R2.4 billion the previous year. But it is not only shareholders and government tax vaults that benefited.
Odendaal says that, unlike many other countries that have experienced a balance-of-payments shock because of the impact of having to import fuel at high dollar prices, South Africa’s export values rose by more than its imports during the year because of precious-metals tailwinds.
An online search by The National shows that, for example, other African countries such as Senegal, Benin, Eritrea, Burkina Faso and Zambia have experienced currency depletion because higher fuel import bills have seen trade deficits grow and local currencies weaken. This has compounded inflation and driven up the costs of transport and essential goods. Some poorer African countries have had to choose between importing fuel or fertiliser, such is their shortages of dollars.
“So our precious metals have been good for the broader economy.
"Sure, at a microeconomic level, we are feeling the impact of higher fuel prices through higher fuel and consumer transport costs, but at least at the macroeconomic level, we have been lucky to have a relatively stable economy,” Odendaal said in an interview.
On the outlook for the gold price, the US Federal Reserve’s decision on 16 September to raise interest rates by 25 basis points to a target range of 3.75% to 4%—the central bank’s first interest rate increase since 2023—is traditionally bad for gold prices because global investment funds earn more interest on dollars.
However, Odendaal said, the broader factor that has driven the gold price higher this year —investors seeking additional security because of growing geopolitical uncertainties—looks likely to have a far greater impact on the price over the next few years.
Strong demand from investors pushed the gold price above a record $5,000 per ounce earlier in the year, although it fell back to $4,000 when the US-Iran war broke out, which was still a very high level. It started rallying again recently, closing last week at $4,450. Investor concern about the US economy and its growing debt burden are also weighing on the dollar, which is good for gold.
Gold’s reputation as a hedge against inflation mainly comes from the inflationary 1970s, when it increased by 1,000% and was the only asset to provide a decent return. Between 1980 and 2011, however, it failed to beat US-dollar inflation.
Over the past four years, there have been two factors behind higher gold prices. The freezing of Russian foreign-exchange reserves in 2022 set off a flurry of buying by central banks and reserve managers in countries that feared a similar fate might befall them.
Given America’s willingness and ability to weaponise the dollar system, it makes sense that these institutions would want to diversify into non-dollar assets, even if only at the margin, says Odendaal.
Secondly, there is a fear that governments in most advanced countries can manage their rising debt only by stoking inflation, capping interest rates or forcing domestic institutions to buy their bonds. In the US, heightened political division means that a national consensus on stabilising debt seems impossible.
On the outlook for investment in gold, a Bank of America survey of South African funds this week showed that metals and mining and banks remain the preferred sectors among fund managers. However, “gold and real estate are the most underweight sectors”.
A Minerals Council statement also says South Africa's mining production and sales data for July 2026 indicate increasing weakness in output, with total production in South Africa down 7.5% year on year.
Coming after a weaker performance in June, “the July outcome seemed to suggest a loss of production momentum rather than a once-off monthly fluctuation”. The year-on-year contraction was concentrated in platinum-group metals, coal and iron ore, the council said.
However, the World Gold Council expects investment to remain the primary driver of gold-demand growth through the second half of this year.