Key points:
- SA might still be classified as a commodity economy, but commodities, specifically gold, do not drive SA’s economic cycle the way they used to. That’s not to say that gold does not play a role in influencing the performance of the USD-ZAR. It does, just not to the extent it would have if SA had invested more in mining and fixed its logistics and electricity crises.
- SA’s terms of trade will remain positive and assist the ZAR in gaining some resilience. The surge in gold prices is of such magnitude that even SA’s smaller exposure to gold has not completely nullified its effect. For now, the gold price still holds relevance to SA and the ZAR, albeit to a smaller degree and while SA’s terms of trade remain positive, the ZAR will still enjoy ongoing resilience.
Baseline view:
Although SA has slipped down the world rankings to be the 9th largest gold producer, the surging gold price can still influence the performance of the ZAR at the margin. While the ZA is negatively affected by political developments and fiscal risk, its performance might’ve been much worse had the gold price not surged. For now, the prospects for the ZAR remain constructive, and should SA’s risk profile improve, the effects of the surging gold price will become even more prominent.
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