Markets.com Logo

Gold Price Surge: A Windfall for Emerging Markets

4 min read

Gold Price Surge Boosts Emerging Markets

The sustained surge in gold prices is bringing a windfall to emerging markets, boosting investor confidence in both gold-producing and gold-consuming nations. This phenomenon extends beyond asset appreciation, encompassing credit rating upgrades and enhanced attractiveness of emerging markets as investment destinations. In South Africa, home to the world's deepest gold mines, the stock market is experiencing its best year in two decades. Mining companies like Sibanye Stillwater Ltd., AngloGold Ashanti Plc., and Gold Fields Ltd. have seen their stock prices surge, reflecting the positive impact of high gold prices on the mining sector. Ghana, Africa's largest gold producer, has not only benefited from rising stock prices but also from an improved credit rating from Moody's Ratings, reflecting increased financial stability.

Developing Nations Leading Buyers

Emerging markets are also emerging as the largest buyers of gold globally, providing a strong boost to the fiscal revenues of those countries. This shift reinforces gold's status as a safe haven in times of economic uncertainty and underscores its importance in diversifying national investment portfolios. For emerging market fund managers, the rise in gold prices provides an additional reason to maintain a bullish outlook on these markets. This rise brings financial gains for both producing and consuming countries, boosting investor confidence and driving them to increase investment in these markets.

Analysts' View

Analysts at Goldman Sachs point out that the strength of South Africa's mining sector is one of the main reasons for their expectation of rising bond and equity values in the country. This affirmation reflects the pivotal role that the gold sector plays in supporting the domestic economy.

Expert Perspectives

Daniel Wood, a portfolio manager at William Blair Investment Management, says that rising gold prices benefit a small number of emerging market countries such as Uzbekistan, Ghana, and South Africa. Wood adds that investors are increasingly looking for alternatives to traditional developed market currencies, especially the US dollar. According to Wood, he sees a promising future for the Uzbek currency, as the country is a major gold producer and holds significant gold reserves. He emphasizes that rising precious metal prices are one of the main reasons behind the historic performance of the South African market.

South Africa's Performance

The South African FTSE/JSE Africa Index has risen by more than 30% in 2025, while the South African rand exchange rate is approaching a one-year high. The 10-year government bond yield recently fell below 9%, its lowest level in more than seven years. Lower inflation has contributed to the South African central bank cutting interest rates, further improving market sentiment.

Dramatic Turnaround

Overall, South Africa has achieved a significant turnaround after years of economic hardship caused by political turmoil and power shortages, which hampered growth and made the country unattractive to investors.

Ghana's Recovery

Ghana is another country benefiting from rising gold prices. After an economic crisis in 2022 and defaulting on debts, the country is now on the road to recovery under the new president, John Mahama. The Ghanaian currency, the cedi, has risen by about 38% this year, the largest increase in the world.

Other Gold-Accumulating Nations

Other investors point out that they are monitoring countries such as Poland, Turkey and Kazakhstan, which continue to increase their gold reserves. Alexis de Mones, a fixed income portfolio manager at Ashmore Group Plc, believes that while this trend is generally positive, investors should not overinterpret it.

Caution Advised

"Countries with a higher proportion of gold reserves appear to be in a better position on the surface, but the accounting impact of price fluctuations should not be seen as a source of credit strength," de Mones says. De Mones adds that the bigger driver for emerging markets is that rising gold prices are coinciding with a weaker dollar and generally looser financial conditions. Ning Sun, senior emerging market strategist at Boston State Street Markets, agrees with this view. She says that rising gold prices are usually accompanied by increasing risk aversion, which puts pressure on risky assets; but because of the weaker dollar and concerns about US economic policies, this relationship has been reversed, and emerging markets have ultimately become the winners. "The benefits of rising gold prices for emerging markets far outweigh the benefits for developed markets," she adds. "Emerging markets not only produce gold, but they also hoard it in large quantities."

Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

Related Articles