Gold has staged its strongest rally in weeks after disappointing US jobs data prompted investors to rethink the outlook for US interest rates, lifting South African gold mining shares and strengthening the rand.
Image: David Grey / AFP
Gold has staged an impressive comeback after weaker than expected United States employment data prompted investors to reassess expectations for further interest rate increases, lifting bullion prices, strengthening the rand and providing fresh momentum for South African gold mining shares.
The precious metal climbed sharply after the US economy added only 57,000 jobs in June, well below market expectations of around 110,000.
The disappointing figures eased fears that the US Federal Reserve would continue aggressively tightening monetary policy, encouraging investors back into gold.
According to Anchor Capital, gold surged 2.4% on Thursday to $4,127 an ounce before extending gains to $4,182.43 an ounce early on Friday.
The rally also supported the JSE, where gold mining counters including Harmony Gold, Pan African Resources, DRDGold and Sibanye Stillwater all posted solid gains.
The improving sentiment also strengthened the rand to R16.22 against the US dollar, its strongest level in weeks.
Nigel Green, CEO of deVere Group, believes the rally reflects something far more significant than a short term flight to safety.
"I think markets have fundamentally mispriced the Fed's next move," Green said.
"The consensus view has become dangerously one dimensional."
He argued that investors have become too comfortable with the belief that interest rates will remain elevated well into next year.
"Investors have spent months pricing for a world of persistently high rates, a strong dollar and continued economic resilience. The risk now is that this entire framework begins to unravel," Green said.
Gold has endured a difficult year as investors embraced the higher for longer interest rate narrative. The precious metal recorded its worst quarterly performance in 13 years during the three months to June and remains around 22% below the record highs reached in January.
Green believes that weakness has now created an opportunity for a sharp recovery.
"Gold isn't rallying because investors suddenly want safety. It's because some investors are beginning to suspect that the market's biggest macro trade of 2025 may have gone too far," he said.
"When markets become crowded around a single idea, they become vulnerable. We've seen that repeatedly throughout financial history."
He added that the implications stretch well beyond the gold market.
"If economic data continues to soften, investors won't just be repricing the probability of another rate hike. They'll start repricing the entire trajectory of monetary policy over the next 12 to 18 months."
Green said that investors should pay close attention to the latest move in bullion prices.
"If that proves to be the case, gold's first weekly gain in over a month will be remembered as an early warning signal that the market's defining trade was beginning to break."
While markets welcomed the weaker jobs report, not everyone believes the Federal Reserve has abandoned its inflation fighting stance.
Neil Wilson, Investor Strategist at Saxo UK, cautioned that markets may have become overly optimistic about the prospect of lower interest rates.
He noted that traders rapidly reduced expectations for a July rate increase following the payroll data, with the probability of a hike dropping from around 30% to 17%.
"My hunch is the market is too quick to read the jobs report as dovish," Wilson said.
He pointed to changing labour market dynamics in the United States, particularly the sharp decline in immigration, which has significantly lowered the number of jobs required each month to keep unemployment stable.
Quoting recent Federal Reserve research, Wilson highlighted that the breakeven pace of employment growth in 2026 "could be significantly lower" than previously estimated and may require fewer than 10,000 new jobs each month.
"We're running at 100,000 or more on a three month average, which is more than enough to beat the near zero level being discussed here," Wilson said.
"So it doesn't look to me like this data changes the fact the Fed is short one side of its mandate, inflation."
He added that despite the market's reaction, "July is still live."
For South African investors, the latest rally highlights how closely local mining companies remain tied to developments in global monetary policy.
Softer expectations for US interest rates generally weaken the dollar and improve the appeal of non interest bearing assets such as gold.
With bullion prices now back above $4,180 an ounce and the rand strengthening, investors will be watching upcoming US inflation data and Federal Reserve commentary closely to determine whether gold's latest rally marks the beginning of a sustained recovery or simply a temporary rebound.
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