The rand extended its winning streak this week, rallying to levels as strong as R16.12/$. A confluence of factors has aligned in the local currency’s favour over the past weeks: record gold prices, improved fiscal metrics, a credible central bank, and persistent dollar weakness. The question now is whether the rand can breach the psychological R16.00/$ mark, and if it does, can it stay there.
Gold and the “Sell America” trade
Gold has been the standout driver. Bullion touched $4,888/ounce on Tuesday, a fresh all-time high, capping a 67% gain in 2025 and adding another 7% year-to-date. Safe-haven demand has intensified amid escalating US-Europe tensions over Greenland. United States (US) President, Donald Trump’s threat of 10% tariffs on eight European nations – rising to 25% in June in the absence of a deal – triggered what traders are calling the “Sell America” trade. Danish pension funds announced plans to divest from US Treasuries. The European Union (EU) signalled potential retaliation on $93 billion of American goods. On the back of this, global banking and financial services giant, HSBC, suggests trading momentum could carry gold to $5,000 in the first half of 2026.
For South Africa, elevated gold translates directly into improved terms of trade. The country’s November trade surplus widened to R37.7 billion, its largest value since March 2022, boosted by precious metal exports.
Fiscal progress and institutional credibility
Domestically, the fiscal picture continues to improve. S&P’s November upgrade of South Africa’s sovereign debt rating to BB – the first in nearly two decades – acknowledged three consecutive years of primary surplus. This week brought further validation: the EU removed South Africa from its high-risk jurisdiction list, effective 29 January, following by the removal of South Africa from the Financial Action Task Force grey list in October 2025. These delistings reduce compliance friction for international transactions and signal the institutional progress that offshore investors have been watching for.
SARB’s new target anchors expectations
South African Reserve Bank (SARB) Governor, Lesetja Kganyago, reinforced the positive narrative at Davos, expressing confidence that South Africa’s 3% inflation target will be achieved in 2026 – ahead of initial 2027 expectations. In addition, South Africa’s December Consumer Price Index (CPI), which came in at 3.6% and full-year 2025 inflation at 3.2%, marked a 21-year low in local inflation numbers, and provides ammunition for continued easing. The SARB’s lower target anchors expectations, reduces the risk premium on South African assets, and creates scope for rates to fall further than previously anticipated. The SARB’s Quarterly Projection Model suggests the repo rate could decline to 5.8% by 2027. Markets are also pricing in a 25-basis point cut when the SARB’s Monetary Policy Committee (MPC) meets on 29 January.
Dollar weakness persists
The dollar, meanwhile, remains under pressure. The US Dollar Index (DXY) has fallen to 98.5, down roughly 10% from early-2025 highs of near 110. Beyond Greenland, concerns over US Federal Reserve (Fed) independence persist following the criminal investigation into Fed Chair, Jerome Powell. Former Fed Chairs, Ben Bernanke, Alan Greenspan and Janet Yellen have condemned the probe as an “unprecedented attempt” to undermine the central bank. The Fed’s Federal Open Market Committee (FOMC) meets on 27 and 28 January and is expected to hold rates steady, but its tone on future policy will be closely watched.
These factors combine to create a compelling short-term case for further rand strength. Technical indicators support the view that the $/R rate is trading below its 50-day, 100-day and 200-day moving averages. Momentum remains intact. A test of R16.00/$ appears plausible should gold hold above $4,800/ounce and dollar weakness persists.
Structural headwinds remain
However, sustainability below R16.00/$ faces structural headwinds that warrant caution.
1. South Africa’s growth outlook remains tepid. The Organisation for Economic Co-operation and Development projects just 1.3% gross domestic product (GDP) expansion for South Africa in 2026. An economy growing at barely above “stall speed” has limited capacity to absorb currency strength without damaging export competitiveness.
2. Uncertainty around South Africa’s inclusion in the US African Growth and Opportunity Act (AGOA) persists, despite progress. The US House passed the extension to 2028 on 13 January by 340 to 54, but the bill still requires Senate approval where South Africa faces vocal opposition. Senator John Kennedy has labelled South Africa “an adversary” and introduced a competing bill requiring a full review of bilateral relations. Even if South Africa is included in the AGOA extension, the 30% reciprocal tariffs imposed in August may still remain in place, depending on what conditions the Senate approves.
3. Gold hovering near $4,900/ounce could raise questions around whether the precious metal’s value is stretched. A correction in the price of bullion – whether triggered by profit-taking, a de-escalation in geopolitical tensions, or a hawkish Fed pivot – would remove a key pillar of rand support. Given how central gold has been to the current rand rally, any meaningful pullback would likely drag the currency weaker.
4. The rand remains a high-beta (more volatile than the overall market) emerging market currency. Global risk appetite can shift rapidly, and any resurgence in dollar demand during periods of market stress would likely reverse the rand’s recent gains. The 52-week range of R16.12/$ to R19.93/$ illustrates the currency’s inherent volatility.
Most analyst forecasts cluster around R16.30/$ to R17.10/$ as the likely trading range over coming months. The balance of risks tilt toward a stronger rand for longer, but a range of the mid-to-high R16.00/$ to low R17.00/$ area represents a more sustainable equilibrium than sub-R16.00/$ levels.
Week ahead
For the week ahead, the FOMC and SARB decisions will set the tone. A dovish Fed combined with a SARB cut could provide the catalyst for a R16.00/$ test. Equally, any hawkish surprise or escalation in geopolitical tensions could trigger a sharp reversal given stretched positioning. The EU high-risk list removal takes effect on 29 January, coinciding with the SARB’s MPC decision – a date that could prove pivotal for sentiment.
The rand rally has been impressive, but sustainability requires more than favourable conditions – it requires conditions that last. Gold at record highs, a weakening dollar, and domestic policy credibility have delivered the current strength. Whether these persist through the year will determine if sub-R16.00/$ becomes the new normal or remains a fleeting reality.
A LOOK AT THE MARKETS
The week’s key themes:
- US 10-year Treasury yields sit near 4.24%, marginally higher after a volatile week
- Intel outlook weighs on tech sentiment
- Gold surged above $4,950/ounce, printing fresh record highs, as Greenland uncertainty lingers
- Greenback set for 1% decline after volatile week led by geopolitics
- Rand remains on the front foot
Bonds
The US 10-year Treasury yield is hovering around 4.24% as we near the end of the week. It is marginally higher after a volatile stretch shaped by geopolitics and global rates. Treasury yields briefly pushed to five-month highs after President Trump threatened tariffs on European countries opposing his Greenland plan, fuelling concerns that Europe could use its sizeable US asset holdings as leverage. Conditions steadied after he signalled a pause and referenced a North Atlantic Treaty Organisation (NATO) “framework for a future deal.” Solid US data also reinforced expectations that the Fed will keep rates unchanged next week.
In the United Kingdom (UK), the 10-year gilt rose to 4.49%. Investors weighed fading trade-escalation fears against sticky inflation; UK CPI came in at 3.4% and service inflation at 4.5%. The UK labour backdrop remains soft, with unemployment at 5.1% and wage growth slowing to 4.5%. The UK’s December borrowing beat expectations, with the budget deficit narrowing to £11.6 billion.
Germany’s 10-year Bund eased to 2.87% as US-Europe tensions moderated, despite Denmark reiterating that Greenland’s sovereignty is non-negotiable.
South Africa’s 10-year bond dipped to about 8.25% on Thursday; lower on the day but roughly 24 basis points higher over the week. With local CPI at 3.6% and the SARB signalling progress toward its 3% target, markets are leaning toward a 25-basis point cut on 29 January, keeping real yields attractive.
Equities
US equity futures were steady this morning after a second day of gains for the major benchmarks. Dow and S&P 500 futures held flat, while Nasdaq 100 futures dipped as multinational tech company, Intel, slid more than 10% after-hours on a softer-than-expected first quarter outlook, weighing on broader tech sentiment. In Thursday’s session, the Dow rose 0.63%, the S&P 500 added 0.55%, and the Nasdaq climbed 0.91%. Risk appetite improved after President Trump pulled back on proposed tariffs tied to Greenland, referencing a NATO “framework” for a future deal. Data also supported the tone: US third quarter GDP was revised up to 4.4%, jobless claims stayed near 200,000, Personal Consumption Expenditure (PCE) inflation met expectations, and consumer spending remained resilient.
In the UK, the FTSE 100 gained over 0.5%, helped by easing trade concerns and a better-than-expected fiscal print, with the UK’s December budget deficit narrowing to £11.6 billion. Diversified food ingredient and retail group, Associated British Foods, firmed after reaffirming guidance, while discount retailer, B&M, fell after another guidance cut.
European equities rebounded sharply, led by banks, including Deutsche Bank, BNP Paribas, UniCredit and Santander, while defence names lagged.
Locally, the JSE All Share extended its run, closing at 121,502 on Thursday, up 0.6% and the Top 40 ended at 113,497, up 0.54%, on the day. Precious metals/miners and financials led, with markets focused on the 29 January SARB MPC decision, where a 25-basis point cut hangs in the balance.
Commodities
Brent held above $64/barrel, recovering some lost ground as traders balanced steady demand signals against a still-ample supply backdrop. The CEO of Saudi Arabia’s largest energy and chemical company, Saudi Arabian Oil Company, pushed back on “glut” fears, arguing demand – especially from emerging markets – remains firm after record consumption last year and expected growth into 2026. The International Energy Agency, however, still sees supply exceeding demand this year, keeping rallies contained. A softer US dollar offered additional support, but the upside is limited by easing geopolitical risk premia, including Ukraine ceasefire speculation and a less aggressive US stance toward Iran. Brent is on track for a modest weekly gain, with risks still finely balanced.
Gold surged above $4,950/ounce, printing fresh record highs. Safe-haven demand was reinforced by ongoing Greenland-related uncertainty, even as Trump dropped planned tariffs on Europe and the EU paused its threatened countermeasures. US headline and core PCE inflation numbers matched expectations, supporting the view that disinflation is continuing while growth holds up. Markets are still pricing in two Fed rate cuts later this year, with added focus on Trump’s impending pick for the next Fed chair – where a more dovish choice could amplify easing expectations.
Silver jumped nearly 3% toward $99/ounce, also reaching record territory. The move was underpinned by the weaker dollar and a broader bid for real assets, alongside market positioning dynamics. Support for the metal has been amplified by strong retail demand, a squeeze-like backdrop, and China-related supply constraints.
Currencies
The DXY is hovering near 98.3 this morning and is on track for a roughly 1% weekly decline, as geopolitics has rattled confidence. Markets reacted to President Trump’s shifting stance on Greenland, including his initial tariff threats against parts of Europe, which were followed by a reversal after he cited a NATO “framework” for a future deal. With details still unclear, and speculation around the terms, which may include potential strategic or resource considerations, risk sentiment remains fragile. Unease also grew around Europe’s sizeable holdings of US assets, after a Danish pension fund flagged plans to exit US Treasury exposure. The dollar’s weekly losses were most visible versus the euro and the Australian and New Zealand dollars.
The euro held around $1.17/€, near a two-week high, as tariff fears eased temporarily. However, uncertainty remains elevated, with Denmark reiterating that Greenland’s sovereignty is not negotiable. With eurozone activity holding up and inflation close to target, markets still expect the European Central Bank to remain on hold for now.
Sterling climbed to about $1.348/£, its strongest level in over two weeks, supported by calmer trade headlines and UK data: December’s deficit narrowed to £11.6 billion, CPI printed 3.4%, services inflation edged up to 4.5%, unemployment held at 5.1%, and wage growth slowed to 4.5%.
The rand has rallied to R16.12/$, its firmest level since June 2022, helped by record precious-metals prices and contained inflation. South Africa’s December inflation print, released earlier this week, was 3.6%, while the 2025 average inflation fell to 3.2%, a 21-year low. This keeps the door open to further SARB rate cuts later this year, but expectations for the upcoming SARB meeting remain split, with global risks still a key swing factor.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 16.11
EUR/ZAR: 18.91
GBP/ZAR: 21.74
GOLD: $4,955
BRENT CRUDE: $64.35
Sources: Bloomberg, Investing.com, Reuters, Trading Economics and Trading View.
Written by: Citadel Advisory Partner and Citadel Global Director, Bianca Botes.