Imagine where the gold price and the rand could be a year from now if global headwinds continue to support both.
It is hard to believe that the rand and the gold price could be doing so well while it feels like the global economy is ready to collapse on the back of volatile geopolitics. But there it is: the rand trading at R16.45/$ this afternoon, while the price of gold sits at a high of $4 447.48.
The rand strengthened below R17/$ in November for the first time since February 2023 after the Medium Term Budget Policy Statement (MTBPS) that included a lower inflation target and an improved fiscal outlook.
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This is why the rand is doing so well
Sanisha Packirisamy, chief economist at Momentum Investments, says the rand performed well on the back of a number of reasons:
- The US dollar weakened from $1.03 to the euro at the start of 2025 to $1.17
- A favourable commodity price mix (a run in platinum over the December holidays, high gold prices and low oil prices owing to the global supply glut)
- Improved investor sentiment
- A vote of confidence in South Africa, with the S&P Global Ratings sovereign rating upgrade and a positive outlook maintained
- South Africa came off the FATF greylist
- Commitment to fiscal consolidation and debt stabilisation
- Reduced load shedding in 2025 and further positive legislative changes in logistics and water, paving the way for additional structural reform measures to eventually lift growth
- Moderate inflation allowed for the credible implementation of a lower inflation target and opened the door to further monetary easing opportunities.
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Gold still shooting the lights out
Not long ago, economists believed that a gold price of $3 000 per ounce was out of reach. Gold started 2025 on $2 600, but soon multiple economic factors drove it higher: first past $3 000 and then past $4 000. In one year! Can we wonder if $5 000 is possible?
Packirisamy says that during the course of 2025, the gold price rally was largely driven by continued central bank purchases of gold bullion in an effort to diversify reserves away from the dollar. “Geopolitical risk factors, including the recent events in Venezuela, further buoyed the safe-haven status of gold.”
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JSE also did well
The JSE also did well, she says, buoyed by:
- Interest rate cut expectations that are good for domestic stocks
- High commodity prices (precious metals) are good for South Africa’s resource stocks
- The performance of dual-listed multinationals
- Lower risk premium as fiscal dynamics improved, and the growth outlook and confidence improved
- Interest from offshore investors increased.