Rand gains 0.5% as gold climbs above $5,000 and dollar weakens

The South African rand began the trading week firmer on Monday, gaining against the US dollar as key commodity prices recovered and the greenback eased.

• South Africa’s rand gained 0.5% against the US dollar on Monday, supported by higher gold and platinum prices.
• Gold climbed above $5,000 an ounce, boosting demand for commodity-linked currencies.
• A softer US dollar also eased pressure on emerging market assets ahead of key US economic data.
• Investors are watching global risk sentiment and domestic data for further direction.

By 06:38 GMT, the rand was trading at about R15.97 to the dollar, around 0.5% stronger than Friday’s close. Higher prices for gold and platinum, two of South Africa’s main exports, provided support for the currency.

“Gold and platinum prices have recovered from their lows, offering some comfort that the ZAR would enjoy some renewed commodity price benefits through the week ahead,” ETM Analytics said in a research note.

At the same time, the US dollar was slightly weaker against a basket of major currencies, easing pressure on the rand ahead of important US macroeconomic data due later in the week. This includes key jobs and inflation figures that could shape expectations around the future path of interest rates.

Markets see the US data as a key driver of global risk appetite and capital flows into emerging markets.

Drivers of strength

The rand’s recent performance has also reflected sharp swings in global commodity markets. In January, precious metals recorded an unusual surge, with gold breaking above the $5,000-an-ounce mark for the first time and silver briefly touching $121. This “stratospheric” rally boosted demand for South African assets before a sharp correction towards the end of the month.

During that period, the rand strengthened to around R15.71–R16.05 to the dollar and firmed from roughly R22.29 to about R21.70 against the pound, before easing back in early February.

Domestic factors also supported the currency. Inflation slowed to 3.5%, while the South African Reserve Bank kept the repo rate unchanged at 6.75%, reinforcing confidence in the new 3% inflation target. Investor sentiment was further lifted by the perceived stability of the Government of National Unity and ongoing reforms in energy and logistics, which have improved South Africa’s risk profile.

Gold, a key export for South Africa, still traded just above the $5,000-per-ounce level on Monday, reflecting sustained investor interest after recent declines.

On the local calendar, South Africa’s annual mining conference was under way in Cape Town from February 9 to 12. The event brings together mining executives, investors and government officials to discuss the outlook for the sector.

Markets typically watch the conference closely, as mining accounts for a significant share of South Africa’s exports and employment.

Later in the week, the national statistics agency is due to release December mining and manufacturing data, which could provide fresh insight into domestic economic activity.

“For now, South Africa’s terms of trade remain favourable, and the outlook for the ZAR is similarly favourable, especially if foreign investors continue to position for a reduced risk profile,” ETM Analytics added.

In the bond market, South Africa’s benchmark 2035 government bond strengthened in early trading, with the yield falling 2 basis points to 8.035%, signalling demand for longer-dated government debt.