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The South African Gold Market


The economy of South Africa depends largely on its mining industry. It  is mines  precious metals like  gold , copper, platinum, and diamonds. The South African gold market is 120 years old. It has seen a continuous cycle of ebbs, and falls in its economic history. Like many other countries, it depended upon the London bullion market to sell its gold to the global gold market. Individual  gold   mining  companies and brokers marketed  gold  through London.

Later, The Reserve bank of South Africa took over the control of the gold market of South Africa in the early twentieth century, after the First World War ended, and used The Bank of England as its selling agent to channel gold to the London bullion market.

Later in 1968, during the Vietnam conflict, the London gold market was closed for two weeks. When it reopened, the future of the global gold market had changed forever. It had lost a number of its potential clients. The three main Swiss banks formed a Zurich gold pool, and approached The South African Reserve Bank to channel its gold. Even today, Switzerland is known to handle most of the gold produced in South Africa in the global gold market.

South Africa has the second largest gold reserves in the world. In the beginning, it contributed as much as half the total gold produced in the world. However, over a period, its  gold  production slowed down, despite the low-cost of  gold   mining  in South Africa. With the  gold  rush in California, and later in Australia,  gold   mining  companies focussed their attention to the newly discovered mines.

Gold   mining  is anyway a difficult job, and in a country like South Africa, where the geological factors make it unbearable to work, the instability of the country further hampers the growth of  gold   mining  industry. The geothermal temperature is more than 50 degree Celsius.

It needs tons and tons of water to be pumped in to cool the inner temperature. Moreover, it requires massive amounts of dynamite, and Cyanide to blast the  mines , and extract  gold  from there. The refining process of course needs uninterrupted power supply.

So altogether, the cost of  mining  and  processing  raw  gold  is extravagant for the government. With its limited resources, and insufficient power supply, coupled with the civil wars, and political instability, it has failed to deliver a prospective gold market. Rand, the South African currency is constantly losing its value against other currencies. The  gold  market has not yet shown signs of recovery, but the government is initiating projects like thermal power stations to generate more electricity for the  gold   mines  to increase their production by 2010.

Related Article :

- History Of Gold Mining In South Africa
- Gold Mining Industry In South Africa

 

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