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South African Reserve Bank

Management of Gold Reserves 

The Bank has managed and held gold reserves since 1925 and purchased nearly all the local gold production.  This involvement with gold has, of course evolved.  Currently, the Bank’s activities in gold are much more akin (by design) to those of other central banks.
Following the announcement by the Minister of Finance on 12 December 1997, South African gold producers can elect to sell all of their output themselves to approved counterparties.  This dispensation was granted provided that the Bank (on behalf of the Minister of Finance) gave the necessary exemption from the provisions of the Exchange Control Regulations.
Although the Bank’s transactions in the gold market have been drastically curtailed by this arrangement, the bank still monitors the gold market closely since its opinion in respect of the gold market is still required and valued.  Moreover, the Bank currently holds some 4 million fine ounces of gold in its reserves.  A very large percentage of these gold reserves are held in the vaults of official sector institutions.
The Bank’s Financial Markets Department may, from time to time, place small amounts of gold on deposit with approved counterparties provided the interest earned is sufficiently attractive.  Any such deposits will be explicitly reflected in the Bank’s monthly statement of its assets and liabilities.
In an effort to support the local jewellery manufacturing industry, gold is also lent to commercial banks at a market related interest rate, who then on-lend the gold to the jewellery manufacturers.  This gold loan however, is only extended to the commercial bank once collateral, in the form of government securities whose values exceed the value of the gold loan, has been placed with the Johannesburg Branch of the Bank. 
These loans are granted for a maximum period of six months.  On maturity, the loan can be repaid in either gold or the rand equivalent thereof.  When repaid in rand, the loan is considered a gold sale.
The Bank is obliged by the South African Reserve Bank Act, 1989 (Act No. 90 of 1989), to exchange legal-tender gold coins for South African rand at its branches at a market-related price.  However, this actively is conducted a service to the general public rather than as being part of the Bank’s reserves management policies.
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