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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
January 14, 2026

South African

Gold and Foreign Exchange

December 2025

The South African International Liquidity Position, as reflected by Net Gold and Foreign Exchange Reserves, saw an increase in US Dollar terms for December 2025, although there was a slight decline when measured in Rand. This occurred alongside the Rand’s appreciation against the US Dollar from November to December, according to data from the South African Reserve Bank.

Reserves rose by almost USD 1.1 billion, building on a USD 660 million increase in November 2025. The consistently high gold prices significantly supported reserves from August to December, with a 65.3% increase compared to the same period in 2024.

Foreign reserves in USD terms continued to rise in December over the previous month. Meanwhile, the Reserve Bank continued its US Dollar purchases in the open market in December, attributed to a weaker Dollar following the Federal Reserve’s interest rate cut in November 2025.

Key commodities such as gold, oil, platinum, and coal are crucial for understanding South Africa’s mining sector and inflation outlook. Monitoring these trends is essential for assessing inflation prospects, especially in light of ongoing international developments and potential trade restrictions with the US following tariff measures introduced in August 2025.

Observing these trends is critical, as inflation expectations will influence the South African Reserve Bank’s (SARB) interest rate decisions in late January 2026. A stable but stronger Rand, coupled with slightly lower oil prices, supports more favourable inflation forecasts. However, geopolitical uncertainties and possible adjustments to trade agreements, like the African Growth and Opportunity Act (AGOA), could heighten market volatility.

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More Coverage

The Fuel Shock Dilemma: Why the SARB’s Inflation Medicine May Hurt a Fragile Economy

For South African businesses and households already managing a tight financial squeeze, the South African Reserve Bank’s (SARB) recent decision to hike the repo rate to 7.0% felt less like economic medicine and more like a handbrake. While central banks traditionally raise interest rates to cool down an overheating economy, South Africa’s current reality is vastly different. Our recent inflation spike isn’t driven by a wild shopping spree, but by global supply shocks and an imported energy crisis. This begs the crucial question: is the SARB using the wrong tool for the job, and at what cost to our fragile economic growth?

The Core Dilemma: Demand vs. Supply and Interest Rates

The case for holding interest rates is strong, as South Africa’s current inflation is being driven by global supply-side pressures like fuel prices, not excessive local spending. Raising rates now would place additional strain on already struggling consumers and businesses without addressing the real cause of inflation. With the Rand strengthening, oil prices stabilising, and diesel costs expected to decline, natural inflation relief is already emerging. Since inflation remains within the SARB’s target range, increasing borrowing costs could unnecessarily slow economic growth and job creation.

A view on Demand in the Economy: Retail Sales performance – March 2026 Data

Amid a turbulent economic backdrop, South Africa’s retail sales surged by an unexpected 2.6% in March 2026, outpacing forecasts and signalling a fragile yet persistent recovery in the consumer market. While interest rate cuts have bolstered household spending, challenges such as rising inflation, potential interest rate hikes, and geopolitical tensions loom large. Despite these hurdles, sectors like “other retailers” and general dealers have notably contributed to this growth spurt, raising questions about the sustainability of this recovery. With business and consumer confidence indices displaying mixed signals, the future of South Africa’s retail strength hinges on international relations, fuel costs, and policy decisions. Explore the dynamics and implications of these developments in our detailed report.

Consumer Inflation Rate – 2026

In an insightful analysis of South Africa’s economic landscape in April 2026, the report delves into the notable 4.0% year-on-year increase in the Consumer Price Index, accentuated by surging costs in housing, utilities, transport, and financial services. Amid rising inflationary pressures fuelled by global uncertainties, including the Middle East conflict and climbing oil prices, the South African Reserve Bank faces critical decisions on interest rates to balance inflation and economic growth. As households grapple with diminished purchasing power, the precarity of reliance on short-term credit looms large, while international factors such as US-imposed tariffs and potential BRICS trade tensions threaten market stability. The report provides a comprehensive look at the delicate dance South Africa must perform to maintain price stability and safeguard the Rand amidst a challenging global backdrop.

The SARB’s High-Stakes Tightrope: Balancing an Inflation Breach Against a Jobless Crisis

Next week’s SARB decision could define South Africa’s economic trajectory: facing an external oil shock and runaway electricity tariffs that threaten to push April inflation past the central bank’s 4.0% ceiling, policymakers must weigh a technical inflation breach against a staggering surge in unemployment and collapsing investment, a choice between credibility and survival. With joblessness spiking and GDP growth stagnant, aggressive rate hikes would risk choking off the private investment the country urgently needs, while inaction could dent the new inflation-targeting framework. Read the full report for a detailed breakdown of the shocks driving this dilemma, the likely “hold” outcome from the May 28 MPC meeting, and what it means for businesses, households, and markets.