Financial markets show bullish trends as gold prices could reach $7 000 per ounce

Financial markets, especially domestically, not only ended 2025 on the strongest levels of growth since 2026, but steamrolled forward during the first three weeks of January.

The All Share index on the JSE ended last year 39.1% higher than the end of 2024 on 115 832 points. Since then, the main equity board has increased by another 4.35% to close on 120 170  pointson Friday. This is 44.4% higher than in the middle of January last year.

The ongoing strong increase in precious metals, foreign buying appetite for South Africa bonds, lower inflation expectations and optimism around a repo rate cut next month all contribute to this strong bullish movement. The result of this strong appetite for South African assets, as well as the weaker US dollar contribute to a strong appreciation of the Rand against the US dollar since the beginning of the year.

On Thursday, the currency traded on R16.34 to the dollar, or 16 cents stronger than the already very bullish level of R16.50/$ at the opening of markets on January 2, 2025. At the close on Friday the Rand traded on R16.40/$, This is R2.44 cents stronger than the R18.84/$ a year ago. Against the Pound the Rand last week improved by 12 cents to R19.97/£. It is the first time since March 2023 that the currency trades against the pound below R22.00/£. Against the Euro the Rand improved by 1.3% during the last seven trading days and ended Friday on R19.08/€. The currency appreciated by 8.6% or 150 cents over the last six months. It is expected that the bullish movement in these markets will continue for most of 2026.

Meanwhile, given uncertain geo-politics in the US, Middle East and Europe, and the uncertainty on the tariff policies and stagflation in the US (lower growth, higher unemployment and increasing inflation), the taste for safety assets, especially gold, platinum and palladium, will continue. The rally for precious metals is likely to continue. The latest forecast for precious metals is very bullish for 2026. Forecasts for the gold price range from R4 975/$ at the end of January to as high as $7 900 per ounce at the end of 2026. The price for bullion advanced by 66% last year. The platinum price shot up by 137% in 2025 from $913.50 per ounce to $2 173 at the beginning of the year. The precious metal closed on Friday at $2 296, gaining already more than 4.0% for the year to date. Bank of America Securities Global Research has raised its 2026 platinum price forecast to $2 450/oz from $1 825/oz and its 2026 palladium price forecast to $1 725/oz from $1 525/oz.

Prospects for the petrol price, inflation, and the repo rate.The US military intervention in Venezuela and the air strikes on Iran, triggers modest oil price movements, with broader geopolitical concerns for global markets and energy investments. Most oil analysts forecast the price for Brent oil is between $64 and $67 per barrel over the next month.

Despite these forecasts, prospects for lower petrol, diesel and paraffin prices in South Africa remains. The Central Energy Fund (CEF) indicates that since the decrease in petrol and diesel prices at the beginning of January 2026, the price for petrol last Thursday, 15 January was over recovered by 82 cents per liter and that of diesel by 92 cents per liter. The stronger rand to the dollar more than compensates for the current hike in the oil price.

The inflation rate for South Africa will be announced this Wednesday. It is expected that rise in the annual consumer price (CPI) will remain at 3.5% in December, the same as the annual increase in November. The effect of foot and mouth disease on beef, pork and sheep prices will be the main reason for the expected stronger annual increase in food prices in the inflation basket. It is still expected that the Monetary Policy Committee of the Reserve Bank may decrease the repo rate with 25 basis points at their meeting in February

Prospects for financial markets this week

Apart from the release of South Africa’s inflation rate for December this week, StatsSA will publish the mining production data for November tomorrow, and the retail sales for November on Wednesday. This data will influence share prices, the Rand and bond rates. On global markets, the US will announce its final estimate of its economic growth rate for quarter three on Thursday. It is expected that the US economy had grown by 4.3% against the annualised 3.9% in quarter two, 2025. This may strengthen mark sentiment that the Federal Reserve will not lower its bank rate at its next meeting. The release of the US personal income and spending data for November on Thursday will also draw attention. Elsewhere, the announcement of Great Britain’s latest unemployment rate and retail sales will also be of importance for develop market share prices and foreign exchange rates.

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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