The price of gold has vaulted past $5,000 an ounce for the first time, carrying South Africa's rand to its best level since June 2022. Prospects of a US government shutdown have weakened the dollar, driving investors toward the safe-haven metal. This development has raised the likelihood of an interest rate cut by the Reserve Bank's Monetary Policy Committee on Thursday.
Gold's remarkable rally continued over the weekend, breaching the $5,000 per ounce milestone for the first time, before climbing to $5,100 on Monday. The metal's ascent in 2025 saw it surpass both $3,000 and $4,000 levels, fueled by geopolitical uncertainties exacerbated by the second Trump administration in the United States.
In South Africa, this has translated into a strengthening rand, which traded near 16.0 to the dollar on Monday—its strongest since June 2022. The currency's gains stem from the dollar's weakness amid fears of another US government shutdown, prompting a flight to gold as a safe haven.
The rand's performance has bolstered hopes for monetary easing. Financial markets now see a 44% chance of a 25 basis point cut in the repo rate at the Monetary Policy Committee's meeting on Thursday, up from just 20% a week earlier. "The gold price has convincingly pierced the $5,000 mark, aiding rand strength, with precious metals (including platinum), South Africa’s key export, and gold benefiting in an environment with high geopolitical tensions," said Investec chief economist Annabel Bishop.
South African gold producers felt the impact on Monday, with shares of Harmony and Sibanye-Stillwater rising over 2%, and Gold Fields gaining around 5%. However, the firmer rand poses challenges for these companies, as their costs are mostly in local currency while revenue comes in dollars.
Overall, the developments signal a pivotal week for South African markets, highlighting the interplay between global tensions and domestic economics.