South Africa’s gross reserves lifted strongly in August, supported by a higher US dollar gold price, the SA Reserve Bank reported on Wednesday.

The bank’s holdings of gold and foreign assets (gross reserves) rose by $1.3 billion rand to $51.4 billion in August from $50.1 billion in July.

“Gross reserves are now sufficient to cover around 6.8 months of imports, the highest figure since July 2010,” Nedbank economists said.

Gold could continue to support reserves going forward given the gloomy global growth prospects, according to Absa Capital.

“With heightened concerns related to the health of the global economy, we would expect safe haven assets such as gold to continue to look attractive to investors in the near-term,” Jeff Schultz, an economist with Absa Capital said.

Tebogo Mosepele, an economist with Standard Bank, said the fact that the SARB was an active accumulator of dollars in August in spite of increased global risk aversion could be bearish for the rand.

“We expect the SARB to continue accumulating reserves opportunistically,” she said.

The SARB reported that the increase in the gross reserves was primarily due to a higher US dollar gold price and the depreciation of the US dollar against other major currencies.

Net reserves rose $1.251 billion to $47.125 billion from $47.874 billion previously, while foreign exchange reserves were up $486 million to $41.2 billion, and gold reserves increased $843 million to $7.341 billion.

The international liquidity position added $1.25 billion to $49.1 billion in August from $47.9 billion in July. Nedbank economists said that this was the third consecutive month of improvement.

The increase in the international liquidity position reflected the increase in gross reserves, the SARB said. The increase in the international liquidity position was however partially off set by the net change in the foreign currency deposits received and the forward position. – Source: http://www.businesslive.co.za/