As precious metals falter, what are the implications for the Rand and global markets?"
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During the past week, precious metal prices came under significant pressure as investors across the globe sold what had until now been regarded as traditional safe haven assets and shifted back towards riskier investments such as the US dollar and equities.
The release of the US non farm payroll data for May on Friday accelerated this trend.
The US economy created 172,000 new jobs in May 2026, well above market forecasts of 85 000.
In addition, the US Labour Department revised the previous month's figure upward to a gain of 179 000 jobs, reinforcing the view that the American labour market remains resilient.
These figures have reduced expectations that the US Federal Reserve will cut interest rates in the near future, with many analysts now anticipating that rates may only be reduced by 25 basis points later in the year.
Annual wage growth in the US came in at 3.4%, which remains below the current inflation rate of 3.8%.
This stronger than expected economic data contributed to a sharp depreciation of the rand. Following the release of the employment figures, the local currency weakened by 32 cents on Friday afternoon, falling from R16.24 to R16.56 against the US dollar.
The weaker rand was accompanied by a steep decline in precious metal prices. Gold dropped by $144 per ounce on Friday to close at $4,335 and ended the week down by $205 per ounce, or 4.5%.
Platinum declined by $101 on Friday to $1 804 per ounce, leaving it down by $119, or 6.2%, for the week.
Palladium lost $75 on Friday alone, ending the session at $1 253 per ounce and closing the week 6.82% lower.
The sharp fall in precious metal prices weighed heavily on the Johannesburg Stock Exchange.
The JSE Mining and Metals Index declined by 11.11% over the week, while the Resources 10 Index dropped 7.3% compared to the previous Friday.
This weakness contributed significantly to the JSE All Share Index (ALSI) falling 3.6% over the week. The ALSI is now trading 7.4% lower than it was three months ago and is down 4.15% on a year to date basis.
Despite ongoing conflicts in the Middle East and the war between Russia and Ukraine, which have weighed on many developed market economies, US equity markets have continued to perform strongly since the beginning of the year.
On Wall Street, the Dow Jones Industrial Average gained 1.04% last week. The index is currently 6.57% higher than at the start of the year and has risen 21.84% over the past 12 months.
The S&P 500 advanced by 0.5% during the week and is now up 10.8% year to date, with a 27.7% increase over the past year.
The Nasdaq slipped 0.5% last week but remains 5.9% higher since the beginning of the year and has delivered an impressive 39.0% gain over the past 12 months.
The MSCI World Index, a broad measure of global equities, declined by 1.3% last week. However, it remains 3.0% higher over the past month and 10.3% higher on a year to date basis.
The relatively stable rand and the lower oil price since fuel prices were last adjusted on 28 May 2026 have improved the prospects for further reductions in diesel prices at the beginning of July.
By last Thursday, diesel was over recovered by R5.72 per litre, while petrol was over recovered by R2.70 per litre.
If the oil price remains around $93 per barrel and the rand stays near R16.30 against the US dollar, motorists could experience another fuel price reduction next month.
However, by Friday these gains had already begun to come under pressure due to the weaker currency and renewed upward movement in the oil price.
This week, markets will remain focused on developments surrounding negotiations between the United States and Iran regarding a possible ceasefire and the reopening of the Strait of Hormuz.
Attention will also turn to the release of the US inflation rate for May 2026 on Wednesday. Economists expect the annual increase in the US Consumer Price Index to come in at 4.2%, up from 3.8% recorded in April.
Should inflation rise as expected, it may strengthen the case for an earlier interest rate adjustment by the US Federal Reserve at its next meeting later this month.
In Europe, the European Central Bank is expected to announce its latest interest rate decision on Thursday, with markets anticipating a 25 basis point increase that would take the benchmark rate to 2.4%.
Locally, Statistics South Africa will release first quarter GDP growth figures on Tuesday. The economy is expected to have expanded by 0.8% year on year during the first quarter of 2026, an improvement from the 0.4% recorded in the fourth quarter of 2025.
On Thursday, Statistics South Africa will publish mining and manufacturing production data for April, while the South African Reserve Bank will release the current account balance figures for the first quarter of 2026.
Chris Harmse is the consulting economist at Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
Image: Supplied
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