Gold & Metals Risk: How Importers and Exporters Can Protect Margins in a Volatile Market

1. Introduction – Why Metals Matter Now

Gold and industrial metals have been on a tear over the last 12 months. From August 2024 to July 2025, gold surged from $2,470/oz to over $3,340/oz, while copper traded consistently above $9,000/mt. Platinum, a key South African export, also spiked above $1,300/oz in June 2025. For CFOs and Treasurers, this volatility has been compounded by swings in the USD/ZAR, which averaged between 17.5 and 18.9 during the same period.

The result? Importers faced rising landed costs, while exporters saw earnings fluctuate wildly. For mid-market corporates with tight margins, unmanaged exposure can mean a swing of several percentage points in profitability. This guide explores how to quantify these risks and use exchange-traded futures and options to stabilise results.

2. Understanding Metal Price Risk

Key Exposures

·       Importers: Manufacturers in automotive, electronics, and construction that source copper, aluminium, or steel.

·       Exporters: Mining houses selling gold and platinum into global markets.

Volatility Snapshot (Aug 2024–Jul 2025)

·       Gold (USD): 9.85% annualised vol

·       Copper: 12.60% vol

·       Platinum: 27.54% vol (most volatile)

·       USDZAR: 8.18% vol

·       Gold in ZAR: 12.57% vol

Gold vs USDZAR correlation: ρ ≈ –0.54 (monthly log returns, Aug-2024 → Jul-2025, Gold in USD vs USDZAR). This indicates a moderately negative relationship, suggesting that when the rand weakens, gold prices (in USD) often strengthen, amplifying local ZAR-denominated volatility.

Footnote: Correlation estimates are sensitive to data window, frequency, and whether Gold is measured in USD or ZAR terms. Using daily data or a different time horizon will yield different values.

3. Exchange-Traded Hedging Tools – Why Futures and Options Stand Out

Futures

·       How they work: Exchange-traded contracts obligating buyer/seller to transact a standard quantity of metal at a future date and price. Marked-to-market daily.

·       Strengths: Transparency, liquidity, reduced counterparty risk (clearinghouse guarantees), and standardisation.

·       Use case: Importers locking in future input costs or exporters stabilising sales revenue.

·       Example: A South African electronics importer buys COMEX copper futures to secure input costs. Gains on futures offset higher spot copper costs.

Options

·       How they work: Provide the right, but not obligation, to buy (call) or sell (put) a commodity at a set strike price.

·       Strengths: Flexibility, ability to insure against adverse moves while retaining upside. Zero risk of forced early settlement due to exchange clearing.

·       Use case: Exporter buying gold put options to protect against falling prices while keeping upside open if gold rallies.

·       Example – Collar: Buy put at $2,232, sell call at $2,585. Effective price band created at near-zero cost. In ZAR, this stabilises margins while allowing upside participation.

4. Hedge Effectiveness – IFRS 9 Example

Scenario: Forecast 1,000 oz monthly gold purchases (Feb–Jul 2025) hedged with exchange-traded futures at an 80% ratio.

·       Prospective assessment: correlation ≈ -0.80 → within IFRS 9’s 80–125% rule.

·       Retrospective dollar-offset ratio: -0.80 → effective.

Disclosure Example:> “The Group designates cash-flow hedge relationships to hedge variability in highly probable forecast purchases of precious metals. Hedge instruments are exchange-traded futures designated at an 80% hedge ratio. Hedge effectiveness is assessed prospectively via critical-terms match and quantitatively via dollar-offset testing. Effective changes are recognised in OCI, with reclassification aligned to profit and loss.”

5. Case Study – Importer of Industrial Metals

Assumptions: Annual copper/aluminium purchases of R50m; base margin 20%. Shock scenario: ZAR weakens 5%, copper rises 10%.

Scenario	Revenue (ZAR)	Cost (ZAR)	Margin %
No Hedge	62.5m	57.8m	7.6%
50% Futures Cover	62.5m	53.9m	13.8%

Result: Exchange-traded futures reduced cost variance and nearly doubled the operating margin, without counterparty credit exposure.

6. Common Challenges & Myths

·       “OTC forwards are cheaper” → Not always. Futures often tighter on bid/ask spreads and eliminate credit risk costs.

·       “Hedging is speculation” → False. Hedging = disciplined risk transfer.

·       “Futures drain liquidity due to margin calls” → In reality, exchange clearing reduces systemic risk; disciplined treasury planning mitigates liquidity needs.

·       “Options are too complex” → Basic collars and protective puts are intuitive insurance strategies.

7. Metals Hedging Readiness Checklist

·       Do you map exposures by month/quarter?

·       Do you assess liquidity impact of futures margining?

·       Do you use options for asymmetric risks (e.g., steep downside)?

·       Do you run hedge effectiveness back-testing (80–125% rule)?

·       Do you maintain IFRS 9 documentation for all hedge designations?

·       Do you stress test both price and FX scenarios in tandem?

8. Conclusion – Positioning for Resilience

Volatile metals markets are here to stay. For South African corporates, this volatility can mean the difference between profit and loss. The good news: with a disciplined hedging framework built on transparent, liquid, exchange-traded futures and options, CFOs and Treasurers can stabilise margins, meet IFRS 9 requirements, and avoid the pitfalls of opaque OTC markets.

Book a Risk Clarity Call  to benchmark your exposure, test hedge effectiveness, and build a metals risk program tailored to your business or if you need a more sustainable trading environment then open a Tradeview Futures account.