Why rallying gold prices is good news for Tanzania

Early February maintained this momentum, with $2,867.00 recorded on February 6 and rising further to $2,904.70 by February 12.

March continued the upward trend with part‑month data showing gold nearing $2,995.50, just shy of the $3,000 mark. April marked a breakthrough: from $3,133.00 on April 1, gold surged past $3,439.10 by April 22, underscoring strong global demand or investor interest.

May saw prices consolidate in the $3,200–3,300 range, providing stability after April's peak. As we entered June 2025, gold prices resumed their ascent from $3,305.30 in June, climbing to $3,390.04 on June 4 and further to $3,390.97 by June 7.

This clear upward trend from January’s $2,625/toz to early June’s $3,391/toz represents a robust gain, indicating sustained demand and optimism.

The Bank of Tanzania (BoT) Director of Policy and Research, Dr Suleiman Misango, told The Citizen that the country stands to benefit significantly from exporting gold reserves classified as monetary gold, a category that commands premium value on international markets.

“We expect to generate more foreign exchange from exports. The gold we hold in our reserves is classified as monetary gold, which carries a higher value and will yield more foreign currency, especially for those exporting it,” he said.

The price rise offers Tanzania a strategic opportunity to improve its balance of payments and strengthen its forex reserves. Monetary gold, unlike regular commercial gold, is held by central banks and monetary authorities as part of official reserves, giving it enhanced liquidity and value recognition in global financial markets.

Meanwhile, a small-scale miner from the Ntababalale Mining Society, Zacharia Soko, said that the recent rise in gold prices has significantly transformed their lives. “The increased value of gold has motivated miners to intensify their efforts, as higher prices translate to better returns on their labour.

This upward trend in gold prices has made mining more attractive, encouraging more people to engage in the industry,” he said.

He emphasised that the sustained rise in market prices has created a more stable and promising environment for small-scale miners. “This long-term increase not only boosts income potential but also provides an opportunity for economic growth within mining communities,” he said.

However, he noted that it also highlights the need for miners to adopt safer and more efficient mining practices to maximise their benefits and ensure sustainability.

Prof Abel Kinyondo of the Dar es Salaam University College of Education (DUCE), noted that mineral prices have been on the rise for several years.

As a result, the contribution of the mining sector to Tanzania’s GDP has increased significantly from around 3.5 percent almost two decades ago to over 10 percent as of now. “This growth has been driven primarily by gold, whose price surge has played a central role in boosting the sector's output,” he said.

He said currently, gold accounts for approximately 80 percent of the mining sector’s contribution to the economy, which has led to substantial overall economic growth. However, Prof Kinyondo cautions that this trend may not last indefinitely. Global gold prices are unlikely to keep rising forever, and a downturn is inevitable.

Therefore, he emphasises the importance of using this window of high returns to prepare for the future by diversifying the economy.

He draws a comparison with Botswana, whose largest export has long been diamonds. For years, the country enjoyed budget surpluses thanks to strong diamond revenues. However, over the past five years, global diamond prices have declined partly due to the rise of lab-grown diamonds.

As a result, Botswana’s economy has contracted by -2.7 percent, and the country is now facing a health crisis, with hospitals struggling due to a shortage of medicine.

Prof Kinyondo warns that Tanzania must learn from this example. "When a commodity is delivering favorable prices, it’s crucial to seize that opportunity to diversify the economy and build resilience for the future," he said.

Why the rally?

The price of gold has been going up during recent year as demand for the precious metal remains strong amid global economic uncertainty.

Global investors view gold as a safer asset during times of economic uncertainty, especially this time around when the US President Donald Trump is repeatedly announcing wide ranging tariffs that upset global trade.

The latest price rise comes amid US-China trade war fears.