Umar-Farooq Kagee, investment analyst at Allan Gray.

Gold’s renaissance as a store of value‍

South Africans are no strangers to gold. After it was discovered in the Witwatersrand in 1886, gold has played a pivotal role in developing the country’s economy.

“At its peak in 1970, South Africa produced over 70% of the world’s gold output, although today that number has dwindled to 3%,” notes Umar-Farooq Kagee, investment analyst at Allan Gray.

Even so, South Africa remains the 12^th largest gold producer in the world and stands to benefit from the recent resurgence in the metal’s price.

“Over the past 10 years to June 2025, the rand gold price has appreciated 320%, outpacing the MSCI World Index’s total return of 308% and the FTSE/JSE All Share Index’s total return of 161%,” he states. “At the same time, the ALSI has experienced a dramatic composition shift over the past decade, with gold equities shifting from a 1.4% weight in the index in 2015 to a15.0% weight today.”

Dollar’s neutral status now under question

Historically, the gold standard helped establish a stable international currency by backing it with a tangible commodity of intrinsic value and limited supply. “However, this system was abandoned by most nations, including the US in 1971, as it limited a government’s ability to manage its economy and money supply,” explains Kagee.

Since then, the US dollar has been the backbone of trade and global reserves, but it now appears on shaky ground. “This is due to several factors, including the weaponisation of Russia’s foreign reserves in 2022. When Russia’s assets were frozen after its invasion of Ukraine, it sent a clear message: Dollar reserves are no longer politically agnostic.”

This benefits gold. “Other countries are losing trust in the dollar as a neutral store of value. Instead, they’re turning to gold, which can be held in secure vaults under their control,” says Kagee.

Central banks are also wary because of default risk. “The US government’s mounting debt and fiscal deficit raise questions about its ability to repay debt. This further boosts gold’s desirability as a reserve free of default risk.”

The rise of new trade blocs, particularly BRICS, and the US’s protectionist policies, also erode the dollar’s appeal. “While all currencies may benefit from de-dollarisation, central banks are increasingly holding gold as a universally recognised, borderless reserve free from interference,” he says.

All that glitters

According to Kagee, for investors to benefit from gold’s resurgence, they need to invest in either the metal itself or in local or offshore listed gold miners. “Global multi-asset funds give investors the flexibility to invest in gold, exposing them to gold and gold-related equities,” he explains.

An example of a high-conviction gold stock in Allan Gray’s portfolio is AngloGold Ashanti. “Under the leadership of CEO Alberto Calderon, the company has done well relative to its peer group on maximising value. He made it clear from the onset of his tenure in 2021: Fix the underperforming assets or get rid of them.”

Despite the 168% share price rally year to date, Allan Gray estimates that AngloGold Ashanti still trades on an attractive 11% spot free cash flow yield and 5.5% spot dividend yield, “making it attractive to investors”.

For investors, he believes the lesson is clear.

“An allocation across both physical gold and the gold miners allows investors to benefit from gold’s growing role as a reserve asset, while preserving a return profile with diverse correlations to other traditional asset classes,” concludes Kagee.