Overview of the currencies of major African gold-backed economies

by MMC
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Gold is one of the most coveted and valuable metals in the world, playing a central role in finance, industry and art while symbolizing wealth and prestige. Governments around the world accumulate gold in their reserves either as a store of value or as a risk diversification asset. Reserves are managed by central banks. This practice serves to preserve the value of their foreign exchange reserves and reduce their dependence on assets such as foreign currencies or government bonds.

Gold reserves provide stability and liquidity, acting as a buffer for a country’s currency during difficult times. Unlike paper currencies that are susceptible to inflation and global economic shocks, the value of gold remains relatively stable, making it a reliable asset.

The Earth is rich in natural resources, distributed throughout the world. While one country may have vast deposits of crude oil, another may boast significant reserves of cobalt and copper. In the case of gold, some countries have large natural deposits, while others hold large reserves. This article explores the monetary performance of African countries with the largest gold reserves from June 2023.

1# Algeria (174 tonnes)

As of June 2023, Algeria held the highest gold reserves in Africa, estimated at 174 tonnes, according to data from Trade Economics. Notably, Algeria’s gold reserves remained stable at 173.56 tonnes in the second quarter of 2023, consistent with the first quarter.

The Algerian dinar, the official currency of North Africa, has maintained relative stability compared to its regional counterparts. At the start of the year, it was trading at 137.168 DZD/$1, but it since diminished at 137.4079 DZD/$1.

2# Egypt (126 tonnes)

Egypt ranks second among African countries with the highest gold reserves, holding 126 tonnes as of June 2023. In the second quarter of 2023, Egypt increased its gold reserves from 125.63 tonnes in the first trimester.

Unlike the stability of the Algerian dinar, the Egyptian pound faced turbulence throughout the year due to rising inflation. Projections suggest that the Egyptian pound could lose almost 20% of its value by the end of 2023. It started the year at 24.751 EGP/$1 and is currently trading at 30.8976 EGP/$1.

3# South Africa (125 tonnes)

South Africa ranks third among African countries with the highest gold reserves, which increased to 125.41 tonnes in the second quarter of 2023 from 125.38 tonnes in the first quarter.

Despite high inflation in recent months, South Africa’s annual consumer inflation fell to 4.7% in July, lowest since July 2021 while it stood at 4.6%. Additionally, the South African rand, which was trading at R17.3851/$1 at the start of the year, is now trading at R19.1769/$1.

4#Libya (117 tonnes)

Libya has the fourth largest gold reserves in Africa, with around 117 tonnes as of June. Libya’s gold reserves remained stable at 116.64 tonnes in the first and second quarters of 2023.

Two years ago, Libya devalued its currency, the dinar, at the rate of US$1 = LD4.48 for all transactions in order to unify exchange rates. However, since this year, the dinar has experienced a significant decline, trading at 4.87496 LD/$1against 4.75230 LD/$1 in January.

Recent challenges, such as flooding in the Mediterranean, have further strained the Libyan economy.

5#Morocco (22.12 tonnes)

Morocco, despite having the fourth largest gold reserves in Africa, is far behind Libya, with an estimated 22.12 tonnes. This figure remained unchanged throughout the first quarter of 2023.

Morocco, known as one of Africa’s top tourist destinations, has enjoyed relative monetary stability during the current year. The exchange rate of the US dollar against the Moroccan dirham (MAD) started the year at 10,210 MAD/$1 and stood at 10.285 MAD/$1 as of September 27.

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