South African Reserves Rose 2.7% in August as Gold Surged

South African reserves advanced 2.7 percent in August as a surge in the gold price boosted the value of the country’s bullion holdings.

Gross gold and foreign-currency reserves rose to $51.45 billion from $50.11 billion in July, the Pretoria-based Reserve Bank said on its website today. The median estimate of eight economists surveyed by Bloomberg was for gross reserves to climb to $50.9 billion. Net reserves increased to $49.13 billion from $47.87 billion, more than the $48.4 billion median estimate of six economists.

“The increase in gross reserves was primarily due to a higher U.S. dollar gold price and the depreciation of the U.S. dollar against other major currencies,” the central bank said.

The spot price of gold jumped 13 percent last month, reaching $1,913.50 an ounce in London on Aug. 23, according to Bloomberg data. Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920, as investors seek to diversify away from equities and some currencies. South Africa’s gold reserves rose 13 percent to $7.3 billion last month, the central bank said.

The central bank has been accumulating foreign currency to try to moderate a surge in the value of the rand, which has gained 32 percent against the dollar since the start of 2009. The rand fell 4.3 percent against the U.S. currency last month.

Rand Pressure

“The figures suggest that the Reserve Bank continues to purchase foreign exchange to alleviate upward pressure on the rand,” Nedbank Group Ltd. (NED), the country’s fourth-largest bank, said today in e-mailed comments. “This strategy is likely to continue. Gross reserves are now sufficient to cover around 6.8 months of imports, the highest figure since July 2010.”

The rand traded at 7.1140 per dollar at 9:05 a.m. in Johannesburg, up from 7.1399 before the release of the reserves data and 7.1896 late yesterday.

Building reserves has come at a cost to the bank, which posted a loss for a second consecutive year of 1.17 billion rand ($164 million) in the 12 months through March. The bank pays more in interest on local-currency debt than it earns on holding foreign-currency assets.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.

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