How Tanzania can maximise benefit from global gold rally

He noted that gold prices have continued to rise in recent years, enabling the government to increase revenue and meet its target of collecting six tonnes of gold annually for reserves.

“We understand that each company has its targets, but we are reminding them of the importance of boosting production,” he said.

Tanzania’s annual gold production currently stands at 55 tonnes, Mr Samamba added, noting that the rise in prices should encourage producers to raise their production levels to reach at least 70 tonnes.

“If that is done, Tanzania would gain significant recognition globally as far as substantial production is concerned. The price increase brings many benefits to the country, including improving the value chain of the gold product,” he said.

Global gold prices hit a record $2,750 per ounce on October 29, buoyed by the US Federal Reserve’s recent half-point interest rate cut, geopolitical tensions and economic uncertainty surrounding the US presidential election.

This means that global gold prices have risen by over 60 percent within one year, up from $1,682 about 12 months ago.

Global analysts say the rally has also been boosted by decisions by the central banks of China, India and Turkey to ease their reliance on the US dollar as well as retail giant Costco stocking 1-ounce bullion bars.

In the Middle East, the ongoing exchange of strikes between Israel and Iran and the former’s war in Gaza and Lebanon could have triggered some safe-haven buying.

In the US, there is still uncertainty around presidential elections, with opinion polls showing it is a tight White House race between Republican Donald Trump and Kamala Harris of the Democratic Party.

Gold prices have slipped back into anti-traditional-driver mode in recent weeks, seemingly caught up in a wider "Trump trade," Capital Economics said in a note quoted by Reuters recently.

Traders tend to flock to gold during periods of uncertainty, betting that its value will hold up better than other assets such as stocks, bonds and currencies if an economy faces a downturn, CTV News, the news division of the CTV Television Network in Canada, reported.

Economist and financial expert Felix Mlaki says that there is a close relationship between a weakening dollar and gold prices.

“There is a significant relationship between the dollar and gold; when one is affected, it reduces the value of the other. If this trend continues, it may also result in a windfall for the government through improved royalties and corporate taxes from mining companies in the country,” he said.

Mr Mlaki adds that it is time for mining companies to increase their production levels and continue exploration, as the demand for gold is currently high. They should take advantage of rising prices, which will help expand the economy as government revenue increases.

He explains that as wealthy individuals move their assets to gold to preserve value, demand increases, pushing up gold prices.

This comes as the government, through the Bank of Tanzania (BoT), actively buys gold from small-scale miners in an effort to bolster the bank's foreign reserves.

During the 2023/24 financial year, which ended on June 30, 2024, the BoT bought 418 kilograms of gold.

Under the recently enacted Mining Act, miners and traders will be required to submit 20 percent of their gold to two major mineral refineries: Eye of Africa Ltd. in Dodoma and Mwanza’s Precious Metals Refinery Ltd., for sale to the BoT.

In total, the BoT plans to purchase six tonnes of gold, valued at approximately Sh1.1 trillion, during the current financial year.