South Africa’s Gold Shines as Liquidity Rises

GOLD
  1. South African Reserve Bank reports a slight increase in gold reserves and a decrease in foreign exchange reserves as of April 30, 2023.
  2. The decrease in gross reserves is partially offset by the rise in the International Liquidity Position.
  3. Exchange rate fluctuations and changes in gold and foreign exchange reserves provide insights into South Africa’s economic stability and financial health.

South African Reserve Bank (SARB) has released an information notice detailing the US dollar equivalent of the official gold and foreign exchange reserves, Special Drawing Rights (SDRs), and foreign currency deposits received from customers as of April 30, 2023. The data shows changes in these financial parameters compared to the previous month, providing insight into the country’s economic health and liquidity position.

According to the data, gold reserves increased slightly by $12 million, reaching a total of $7.996 billion as of April 30, 2023. This can be attributed to an increase in the US dollar gold price, which rose by 0.15%, with the market price at $1,983.19 and the statutory price at ZAR 36,393.92.

SDR holdings saw a modest increase of $8 million, reaching $6.36 billion. SDRs are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). They provide a level of liquidity for the central banks of participating countries.

Foreign exchange reserves, which include foreign currency deposits received (FDR), decreased by $151 million, bringing the total to $47.363 billion. FDR balances consist of foreign loans and foreign exchange purchases by the National Treasury, obtained through both outright purchases and foreign exchange swaps.

The gross reserves, which comprise gold reserves, SDR holdings, and foreign exchange reserves, dropped by $131 million, settling at $61.72 billion. The decrease in gross reserves is primarily due to foreign exchange payments made on behalf of the government. However, this was partially offset by the increase in the US dollar gold price and asset price movements.

Foreign currency deposits received declined by $283 million, reducing the total to $6.89 billion. The forward position, which mainly reflects outstanding foreign exchange forward transactions, fell by $10 million to $540 million.

The International Liquidity Position (ILP) increased by $142 million, reaching a total of $55.37 billion. The rise in the ILP can be attributed mainly to the decline in foreign currency deposits received and the change in gross reserves.

The exchange rate for EUR/USD increased by 1%, GBP/USD by 0.79%, USD/ZAR by 3.26%, SDR/USD by 0.13%, and USD/CNY by 0.66%. These exchange rate fluctuations impact the country’s international liquidity position and the value of its reserves.

In conclusion, while the South African Reserve Bank reported a decrease in gross reserves as of April 30, 2023, this was offset by an increase in the International Liquidity Position. The changes in gold and foreign exchange reserves, SDR holdings, and foreign currency deposits received provide valuable insights into South Africa’s economic stability and financial health.

Table 1: South African Reserve Bank Reserve Data (USD millions)

Category30 April 202331 March 2023Change
Gold reserves7,9967,984+12
SDR holdings6,3606,352+8
Foreign exchange reserves(2)47,36347,515-151
Gross reserves61,72061,851-131
Foreign currency deposits received(3)(6,890)(7,172)+283
Forward position(4)540550-10
International liquidity position (ILP)55,37055,229+142
Caption: Table 1 summarizes the changes in gold reserves, SDR holdings, foreign exchange reserves, gross reserves, foreign currency deposits received, forward position, and international liquidity position between March 31, 2023, and April 30, 2023.

Table 2: Exchange Rates and Gold Price (% change)

CategoryValueChange
EUR/USD1.09831.00
GBP/USD1.24730.79
USD/ZAR18.35123.26
SDR/USD1.34700.13
USD/CNY6.91960.66
Gold Price1,983.190.15
Caption: Table 2 presents the exchange rate and gold price changes between March 31, 2023, and April 30, 2023, which impact South Africa’s international liquidity position and the value of its reserves.
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