The price of gold is now at a sky-high $4,000/oz, double its level at the beginning of 2024. Just this year it has jumped 54%.
The most recent time gold prices rose by this much in such a short period was in 1979, when prices more than doubled in one year. Standard Bank’s analysts predict further increases in the coming years, with the expected reserve diversification away from — and the resultant depreciation of — the dollar a key underpin for the bullion.
The historical importance of gold mining for the political economy of SA and the Southern Africa region cannot be overstated. Gold mining and its downstream activities were foundational to the modern SA economy, its structure, institutions and inequalities.
Labour needs and the distribution of rents coming from mining activity determined the political economy of the region for a century and beyond. The economic infrastructure it built still influences politics and the economics of Southern Africa.
Gold also has a deep social resonance for Southern Africa’s citizens. The region’s economic hub, Gauteng, was built on gold mining and its name reflects this. Johannesburg, Egoli, the City of Gold, is still a city of hustlers. People come here to pan for gold, and the frantic energy of the city reflects it.
Like the prospectors of old, Gauteng residents are either new arrivals trying to hustle for nuggets, or their children and grandchildren. A quarter of SA residents now live in Gauteng, a number that will only increase as the country continues to urbanise.
Many of us remember when the price of gold was the key economic indicator, published nightly on the news.
This no longer happens. We have now had a strong rally in the shiny metal and there is no palpable excitement. While still important, the prospects of the economy have become less dependent on the gold price.
Our economic decoupling from gold reflects positive and negative developments. On the negative side, gold production has declined steadily since the dawn of democracy. According to Stats SA we produce only 15% of what the country produced in December 1993. This is a function of the adverse economics of the deep mining that is required to exploit the existing ore, and slow explorations due to difficulties over minerals policies in recent years.
On the positive side, SA’s mining has become more diversified and so has the economy. Mining production excluding gold has increased 50% over the period, and mining activities accounted for only 4.4% of GDP in 2024, down from 10% in 1993.
Yet the gold price still matters, and prices at current levels will help stabilise the economy and anchor asset prices in the months ahead. Gold is a big proportion of metal exports, and the rise in prices is positive for the currency and accounts for the recent strength in the rand. This will in turn improve the outlook for inflation and interest rates over time.
Higher earnings from miners will also support fiscal outcomes. The price of gold is 28% above the National Treasury’s budget forecast for 2026. Platinum is 67% above, and palladium 40%. This suggests that there is a high likelihood that taxes, especially on the corporate side, will be above budget forecasts over the next two years, anchoring debt metrics and hopefully supporting much-needed government expenditure.
I am conflicted about gold. I cannot think of gold and gold mining without considering the deep socioeconomic injustices the industry helped cause in our region. Yet I am relieved that this metal could play a role in bailing us out of a difficult economic spot. Long may it stay above $4,000!
• Lijane is global markets strategist at Standard Bank CIB.
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