Bianca Botes, Director at Citadel Global

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 (SA), 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 SA’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 SA from its high-risk jurisdiction list, effective 29 January, following by the removal of SA from the Financial Action Task Force (FATF) 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 SA’s 3% inflation target will be achieved in 2026 – ahead of initial 2027 expectations. In addition, SA’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 SA 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. SA’s growth outlook remains tepid. The Organisation for Economic Co-operation and Development projects just 1.3% gross domestic product (GDP) expansion for SA in 2026. An economy growing at barely above “stall speed” has limited capacity to absorb currency strength without damaging export competitiveness.
2. Uncertainty around SA’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 SA faces vocal opposition. Senator John Kennedy has labelled SA “an adversary” and introduced a competing bill requiring a full review of bilateral relations. Even if SA 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 the coming months. The balance of risks tilts 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.

ENDS