Gold prices temporarily soared past $3,000 per ounce for the first time on Friday, fuelled by a surge in central bank purchases, widespread economic instability, and President Donald Trump’s bold moves to reshape global trade through sweeping tariffs. Bullion peaked at $3,004.94 on Friday before relinquishing gains, but its recent strength still reinforced gold’s time-honoured role as a reliable store of value and a barometer of market unease during turbulent times. What makes this rally particularly interesting is that it has occurred against a backdrop of high interest rates and a strong USD. Gold tends to face resistance from high interest rates and a strong US dollar—conditions that typically favour interest-bearing assets like bonds or cash over non-yielding bullion.
The gold rally, and consequent improvement in South Africa’s terms of trade, would have had a much more supportive impact on the ZAR if market sentiment towards the currency had not been dented by deteriorating US-SA relations. On that front, note that US Secretary of State Marco Rubio declared South Africa’s Ambassador to the United States, Ebrahim Rasool, persona non grata on Friday, stating that Rasool is no longer welcome in the country. In a social media post, Rubio described Rasool as a divisive figure who harbours animosity toward America and President Donald Trump. South African President Cyril Ramaphosa confirmed Rasool’s expulsion on Saturday, expressing regret over the decision. This action follows President Trump’s recent criticisms of South Africa’s race laws and growing ties with countries like Russia and Iran and will certainly have a negative impact on South Africa’s risk profile.
ZAR Markets
Despite a strong rand rally on Friday, the USD-ZAR was unable to break through its 200-day moving average at 18.1300. This level lines up with technical support around the 50.0% Fibonacci retracement level of the pair’s September-January uptrend and marks the lower boundary of its current trading range. Pulling the lens back slightly, the USD-ZAR’s downtrend from its January highs remains intact for now but could face challenges in the coming weeks as the pair nears the floor of its longer-term uptrend since October 2024. There is a growing risk that one of the trends will be broken in the coming weeks, which will provide broader sentiment for the USD-ZAR. Of course, much depends on the USD leg’s direction, which could be volatile as the US business cycle turns lower. Simultaneously, the market is also facing an uncertain domestic environment, which further supports an outlook of heightened volatility.
Global FX Markets
The U.S. dollar remained near a five-month low against major currencies on Monday, weakened by President Donald Trump’s unpredictable trade policies and disappointing U.S. economic data, including a drop in consumer sentiment to a nearly 2.5-year low and rising inflation expectations due to widespread tariffs sparking a global trade war. Analysts from Goldman Sachs noted two key market shifts: a decline in U.S. asset values due to tariff volatility and policy uncertainty, and a positive fiscal outlook in Germany following a deal to increase state borrowing by 500 billion euros ($544 billion) for infrastructure and defense, challenging the narrative of U.S. economic dominance.
The euro hovered near a five-month high at $1.0881, while the Japanese yen stayed strong near its own five-month peak, supported by hawkish Bank of Japan (BOJ) signals, though no policy change is expected soon. The Chinese yuan approached a four-month high offshore, ahead of a press conference on boosting consumption through measures like income increases and childcare subsidies. The dollar index held steady at 103.71, down nearly 6% from its mid-January peak of 110.17, reflecting fading optimism about Trump’s growth promises