Gold mining still has more to offer to South Africa’s economy, though in the past ten years its contribution to the country’s Gross Domestic Product (GDP) has been declining, says a commentary from Monetary Library.
Monetary Library argues that there are two main factors why the gold mining should be revitalised – the source of employment and the country should benefit from the popularity of gold as a safe haven in a volatile financial markets.
In sub-Saharan Africa, each person employed in the gold sector is responsible for up to 10 dependents. Therefore, there is a strong need for protecting and preserving South Africa’s gold industry.
Investors are eyeing the commodities markets for opportunities in gold, in the wake of recent volatility in the financial market. “The recent suicide bombing in Manchester, UK has brought instability to the financial markets. Gold is currently trading at $1,259.67 per ounce (May 23, 2017),’ notes Monetary Library.
“The six-month performance of gold reflects an appreciation of 4.10%, but gold’s lacklustre performance over the past 30-day period is down 1.18%. Gold plunged to $1,214.30 per ounce on 9 May, but has since appreciated sharply. A big part of the reason why gold is resurgent is dollar weakness. The DXY is trading at 97.05, down 1.16% over five days. For the year to date, the US dollar index is down 5.20%. Every time the USD depreciates, gold tends to prosper,” it adds.
Currently, about 120, 000 people are employed gold mining. While the Witwatersrand Basin remains the world’s biggest gold resource, South Africa’s gold industry only makes up 5% of global supply.
At its zenith in the 1980s, gold mining was one of the biggest contributors to the country’s Gross Domestic Product (GDP), now it has shrunk. Since 2012, gold sales have plunged by 40%, thanks to rising costs (wages and production) and unfavourable exchange rates which have eroded profitability for South African mining companies.