US President Donald Trump has slapped South Africa with new tariffs. But he has also given us a bonanza worth R20 billion a year in the form of the extra export earnings thanks to a higher gold price, while he has also helped to add about R600 billion to the value of the gold shares listed on the JSE. Trump’s policies have generally weighed on the US dollar but have also boosted interest in gold as a store of value.
The gold price has been on a tear this year, up by 23% in US dollars and 19% in rands. If we adjust for US inflation, the dollar price of gold is now at record levels, higher than it was in early 1980 when the gold price broke US$800/oz. In real rand terms, the gold price is now almost three times higher than it was in 1980.
Figure 1: Gold price in US dollars and rand
Source: South African Reserve Bank and Investec Wealth and Investment International, 11/08/2025
Figure 2: Real (inflation-adjusted) gold price in US dollars and rand
Source: South African Reserve Bank and Investec Wealth and Investment International, 11/08/2025
This favourable trend for gold producers has unfortunately not been favourable enough to arrest what has been a continuous decline in the quantity of gold mined in South Africa. The rand costs of mining gold, especially employment costs, have risen faster than prices in general, thus reducing profits. There is also less gold to be found in the ground. The grade of the ore extracted for gold has fallen from 12 grams per tonne of rock in 1970, to eight grams per tonne in 1980, to less than six grams per tonne today. The last significant increase in gold mining capacity was the South Deep venture undertaken by Gold Fields in 2015, and before that, the Moab-Khotsang development of 2003, now part of Harmony Gold.
Gold mining now plays a diminished role in the SA economy. In 1980, South African gold mines produced close to 1,000 metric tonnes of gold a year. Current annual output appears to have stabilised at about 100 tonnes. Gold sales in 1980 were equal to 15% of GDP and 45% of all merchandise exports. These proportions today are about 2% of GDP and 7% of goods exported.
Figure 3: Annual SA sales of gold and platinum group metals in rand
Source: South African Reserve Bank and Investec Wealth and Investment International, 11/08/2025
Despite this diminished role, the higher gold price has been a boon for shareholders in gold mines with significant reserves of gold in the ground. These reserves are consistently revalued in line with the current price of gold to add to the prospective operating profits from the mines. The proven reserves of gold of South African mines are estimated at an equivalent of about 20 times the current annual output.
This year, the market value of the four largest gold mining companies listed on the JSE (Gold Fields, Anglogold Ashanti, Harmony and Pan African) has more than doubled, from a combined US$30 billion in January, they are worth about US$70 billion today.
(Before we get carried away with the scale of this wealth creation on the JSE, it should be recognised that the combined value of JSE-listed gold miners is now less than that of the leading US-listed global miner, Newmont, which has a market value of US$75 billion)
Figure 4: The market value of JSE-listed gold mines
Source: South African Reserve Bank and Investec Wealth and Investment International, 11/08/2025
The gap between the gold price and the all-in sustainable cost of mining gold (which excludes capex) has widened significantly, to approximately US$1,971/oz for Harmony, US$1,694/oz for Anglogold Ashanti and US$1,739/oz for Gold Fields. Operating profit margins have therefore widened – you get more bang for your gold buck by investing in gold mines rather than in gold bars. Since 2020, the monthly percentage move in gold shares is about twice the move in the gold price (in both directions).
Changes in the gold price have a statistically significant impact on the changes in the value of the gold shares. They explain up to 50% of the move up or down in the value of the shares. This, however, leaves much to be explained in the behaviour of shares in gold mines by forces other than the gold price itself. For example, we need to account for the increased risk attached to attempts to add to production. Or that cash-flush gold mine managers will pay too much to acquire other gold mines. Or that gold mines over their long lives may be subject to onerous taxes and regulations, or even expropriation without adequate compensation – a key risk as they become more profitable. These are all unknowns that affect the present value of any mining venture in South Africa. Gold in the ground is worth more in North America and Australia than in South Africa and the rest of Africa for these reasons.
Judged by the Amendment of Mining Regulations Bill, now with Parliament, the government seems not to recognise how the value of a gold mine, and the incentive to explore for and establish new mines, is adversely affected by policies that are hostile to risk-taking shareholders. It would be wise to heed the advice from the mining industry.
*With special thanks to my colleague Campbell Parry and Graham Barr from the University of Cape Town for their assistance. They do not bear any responsibility for my interpretations.
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