The South African rand climbed to its strongest level against the US dollar in more than three years on Monday, extending a rally driven by record gold prices, improved global risk appetite, and renewed weakness in the US currency.
The rand touched 16.00 to the dollar for the first time since June 2022 and was trading at 16.01 by 09:38 GMT (11:38 a.m. in South Africa), as investors rotated into commodity-linked and emerging market currencies.
The gains came as gold surged to a historic high above $5,100 an ounce on Monday, fuelled by escalating geopolitical risks, central bank buying, and demand for safe-haven assets.
Spot gold rose by 1.98 percent to $5,081.18 an ounce by 03:23 GMT after hitting an intraday peak of $5,092.71, according to Reuters. US gold futures for February delivery climbed 2.01 percent to $5,079.30 an ounce.
Bullion prices have surged 64 percent over the past year and are up more than 17 percent year-to-date, supported by expectations of easier US monetary policy, sustained central-bank purchases, and record inflows into exchange-traded funds. China extended its gold buying for a 14th consecutive month in December, reinforcing the strength of official-sector demand.
As one of Africa’s largest gold producers and exporters, South Africa has benefited disproportionately from the rally. The rand — a risk-sensitive currency that often tracks global commodity prices and shifts in US monetary policy — has gained about three percent against the dollar since the start of this year.
The combination of elevated gold prices and a softer dollar has strengthened South Africa’s terms of trade, improving sentiment toward the currency despite lingering domestic economic challenges.
Investor attention is now turning to the South African Reserve Bank’s (SARB) first interest rate decision of the year, scheduled for Thursday. Markets are watching closely for guidance on the central bank’s policy outlook as inflation pressures continue to ease.
The SARB cut its benchmark lending rate by 25 basis points in November, citing room to make monetary policy less restrictive amid an improving inflation trajectory and declining global price pressures.