Markets wrap: gold near three-month high fuels debasement trade

Global markets moved to a familiar rhythm on Monday, with a rally in gold running alongside a choppy session on Wall Street, while the rand held close to its strongest levels since February on the back of cooling South African inflation.

Gold traded around $4,650 an ounce on Tuesday, not far off the highest levels it has reached in more than three months. The rally has been driven by renewed interest in the so-called “debasement trade” – the flight into hard assets prompted by unconventional monetary interventions – after the US Treasury expanded its buyback programme for long-dated government debt last week.

Treasury secretary Scott Bessent has signalled he is prepared to increase the buybacks further, while also flagging a longer-term fiscal plan still to come. The metal has now gained close to 14% over the past month alone.

Wall Street closes mixed as chipmakers slide

US equities finished Monday's session without clear direction. The S&P 500 slipped 0.28% to 7,652.86, pulling further back from the record high it set earlier this month, while the Nasdaq Composite fell a sharper 0.76% to 25,980.19 as semiconductor stocks weighed on the index. The Dow Jones Industrial Average bucked the trend, adding 0.26% to close at 53,417.16.

Chip stocks bore the brunt of the selling, with Micron Technology shedding almost 6% and Advanced Micro Devices and Broadcom each falling more than 2%, as investors weighed persistent doubts over the scale of capital spending on AI infrastructure. Nvidia eased ahead of its earnings report, due after the closing bell on Wednesday, seen as the next major catalyst for the broader AI trade.

Adding to the day’s headlines, the US Treasury announced expanded sanctions on Iran, dubbed “Operation Economic Outcast”, as Washington pushes to isolate Tehran economically. Energy prices eased on the day but remained elevated.

Rand firms as local inflation cools

The rand was trading around R16.02 to the dollar, close to its strongest level since late February, supported by a softer greenback and the rally in gold prices. The currency has strengthened by more than 4% over the past month, aided by domestic data showing consumer inflation eased to 4.3% in July from 5% in June – below market expectations and helped by lower fuel costs following a temporary US-Iran truce. Core inflation, however, ticked up for a fifth consecutive month to 4.2%, its highest level since July 2024, leaving the disinflation picture more mixed than the headline number suggests.

The South African Reserve Bank left its policy rate unchanged at 7 per cent at its last meeting, citing an improved inflation outlook. Attention now turns to the Bank's next decision on 23 September, with the central bank weighing whether to hold steady again or deliver a further increase depending on how price pressures evolve in the months ahead.

Local focus

With gold holding near three-month highs, sentiment on the JSE is likely to stay tilted toward the resources counters, where miners with dollar-denominated earnings tend to benefit most directly from both a firmer bullion price and a stronger rand. Sasol, meanwhile, remains in focus ahead of its results, due on 1 September.

• SOURCES: Reuters, Bloomberg, Trading Economics, CNBC.