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We examine the relationship between South African Rand and gold price volatility using monthly data for the period 1980-2010. Our main findings is that prior to capital account liberalization the causality runs from South African Rand to gold price volatility but the causality runs the other way around for the post-liberalization period. These findings suggest that gold price volatility plays a key role in explaining both the excessive exchange rate volatility and current disproportionate share of speculative (short-run) inflows that South Africa has been coping with since the opening up of its capital account.

Finance --- Business & Economics --- Money --- Prices. --- Foreign exchange rates --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Commercial products --- Commodity prices --- Justum pretium --- Price theory --- Rates --- Prices --- Consumption (Economics) --- Cost --- Costs, Industrial --- Cost and standard of living --- Supply and demand --- Value --- Wages --- Willingness to pay --- Gold --- Rand area --- E-books --- Specie --- Native element minerals --- Precious metals --- Transition metals --- Common Monetary Area (Southern Africa) --- Rand Monetary Area --- Rand zone --- Monetary unions --- Exports and Imports --- Foreign Exchange --- Macroeconomics --- International Investment --- Long-term Capital Movements --- Current Account Adjustment --- Short-term Capital Movements --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Commodity Markets --- Currency --- International economics --- Gold prices --- Real exchange rates --- Real effective exchange rates --- Capital account liberalization --- Commodity price fluctuations --- Balance of payments --- South Africa