PDSNET Market Snapshot

At the start of a new year, we always give our view of what we think is to come. Since our last article, published on 22nd December 2025, there have been some notable developments in the international arena which are potentially important for South African investors.

(1) As expected, the rand has strengthened further, continuing the trend of the last nine months and breaking convincingly below R16.50 to the US dollar. What is notable is that the rand has also strengthened against other hard currencies, like the euro and the British pound. We have long considered the rand to be under-valued and we expect it to continue strengthen, especially against the US dollar which has itself been weakening against other hard currencies. Consider the chart:

The rand broke below the key R17.50 level in September and then that level became a support level. But now it has moved down to R16.50 and looks set to stabilise at that level. The strengthening currency reflects a growing local and internation optimism about South Africa’s future.

(2) Gold and platinum continue to perform well bolstering South Africa’s economy and providing jobs for thousands of miners. Gold reached a new all-time record high on Friday last week closing above $4500 for the first time ever. I bought my first Krugerrand for R600 in 1985 and last week that same coin was worth a new record high value of R75 000. We reiterate our view that, because of the political risk in this country, South Africans should hold 10% of their total wealth in Krugerrands. Gold may correct from these levels on profit-taking, but the long-term trend will continue to be up – so make sure you have some of these internationally accepted, highly transportable assets in your portfolio.

(3) The unexpected invasion of Venezuela and the capture of Maduro marks a new direction for the Trump administration. The attack was executed with surgical precision and, while it sets a dangerous precedent, it has definitely boosted Trump’s dictatorial confidence. One effect is that he has suddenly become less afraid of Putin and has been willing to put in motion various measures which are good for Ukraine and bad for Russia. The first was capturing two oil tankers in Putin’s “shadow Fleet” and the second approving a Bill which will result in tariffs of up to 500% on any country which buys oil from Russia.

At the same time, the Ukrainians have been very effective in their management of the drone war, increasing their production of drones dramatically and innovating new technologies which have given them a definite edge over Russia. This can be seen in their recent use of a land drone, packed with 12 anti-tank mines, to completely wipe out an entire Russian stronghold.

We never expected the war in Ukraine to last as long as it has, mainly because we thought that, with Europe and America’s backing, Ukraine ultimately had far more resources at its disposal than Russia. We still believe firmly in Ukraine’s superiority, but this year we expect that advantage to finally force Putin to the negotiating table.  The Russian economy is crumbling under sanctions; the Urals oil price has collapsed and Russia’s performance on the battlefield has been abysmal.  

(4) The South African economy is definitely improving. There is, of course, still a great deal of room for further improvement and we remain light years away from being a first world country – but our economy is in far better shape than most third world or emerging market countries, especially most of those in Africa to the North and many of those in South America and Asia. The improvements can be traced back to the monetary discipline exercised by the Reserve Bank which has brought our inflation rate close to or even better than many first world countries. Low inflation has increased the level of real take-home pay and that, in turn, is impacting consumer spending. We expect the economy to continue improving this year, provided that there are no material external shocks. The Municipal elections towards the end of the year should be significant in consolidating our new direction.

(5) The Great Bull Market, which began in March 2009, remains intact, with the S&P500 closing on Friday last week at another new all-time record high. The productivity impact of AI and the steady move towards solar and other alternative power sources is raising the performance and prospects of S&P500 companies. Consider the chart:

The stage is set for another strong year featuring rising profits stimulated by further advances in technology and lower oil prices.

As a private investor you should be close to fully invested in this market. Just make sure that you maintain a strict stop-loss strategy. Remember, being successful in the share market is not so much about making money as it is about not losing it.    

The Rand

2025 has been a year of solid progress for South Africa. The government of national unity (GNU) has held together despite dire predictions and the country has implemented a number of notable economic reforms. At the same time, international investment sentiment has shifted firmly towards “risk-on” and the US dollar has lost significant ground against other first-world currencies.

The effect of these developments has been that in the last 8 months the rand has appreciated from an intra-day high of R19.93 on the 9th of April 2025 to the US$ to current levels around R16.75 – a gain of 16%. Consider the chart:

Combined with the falling oil price, this is having the effect of reducing the price of fuel in the country rapidly – and that has resulted in sharply lower inflation. The drop in inflation means that consumers are seeing an increase in the level of their real incomes and they have been paying off debt and spending more. In our view, the rand will continue to hold its value against other hard currencies and to appreciate against the US dollar.

Oil and Ukraine

The price of oil has continued to fall, with North Sea Brent dropping below $60 for the first time since February 2021. This decline reflects the steady movement of the world away from fossil fuels and the rapid implementation of alternative energy installations, especially solar power. We expect this trend to continue and even accelerate as the cost of solar power continues to become more efficient and more affordable.  

The price of Urals crude has fallen even further than Brent and it now trades for less than $35 per barrel. This is a direct consequence of the Ukrainian attacks on Russia’s shadow fleet both in the Black Sea and even in the Mediterranean. Together with their on-going destruction of Russia’s oil infrastructure, these attacks are rapidly eroding Russia’s ability to finance the continuation of the war.

At the same time, Ukraine has recently secured a pledge for a further 90bn euro loan from the European Union to continue paying for the war for at least the next two years. To us it seems impossible for Russia to continue funding this war under these conditions and we anticipate some sort of resolution of the situation in the fairly near future – probably next year.

The S&P500 Index

Wall Street remains firmly in a long-term bull trend, but has been moving more-or- less sideways since the beginning of October 2025. There has clearly been some rotation out of high-tech and especially AI shares into the broader market. Consider the chart.

The recent 5% correction in November took the S&P down to the cycle low of 10th October, where it found support. There was a very strong recovery from this level culminating in a new all-time record closing high at 6901 on 11th December 2025. Then the rotation and profit-taking began.

Technically, there is a possibility that what we are looking at is a double top formation with the highs on 29th October and then on 11th December. Our view is that this represents some resistance at the 6900 level and in time the market will recover and break convincingly above this level. The latest inflation and jobs figures coming out of America indicate that the economy is still performing well – albeit more slowly than it has been. There is still room for further interest rates cuts with inflation apparently well under control.

The staff and directors at PDSnet take this opportunity to wish you and your family all the best for the Festive Season and the New Year.

Please note: Our next article will be published on 12th January 2026.  

Why is the Bitcoin price falling when the price of gold is rising?

Cryptocurrency doyens always claim that Cryptos are somehow a hedge against the impending weakness of paper assets – and especially the US dollar. But our observation is that Bitcoin is more of a risk-on asset than a risk-off asset. When risk-averse investors run for cover, they don’t switch to Bitcoin. Rather they switch out of Bitcoin and into gold.

Cryptocurrencies and gold are the same in that neither one of them offers the investor any kind of income or return. Your Krugerrands and your Bitcoin don’t pay you any interest, rent or dividends. So, neither of them can really be seen as an investment in any true sense. Both owe their value to investor belief and to their relative scarcity.

The difference is that almost everyone throughout the world believes in the value of gold, while only a very small, relatively esoteric, group of passionate protagonists (like Elon Musk) and their followers believe in the value of Bitcoin.

The simple truth is that your Krugerrands can be bought and sold in any country throughout the world. From the humblest coin dealer in the backstreets of Shanghai to the sophisticated halls of London’s Threadneedle Street, one ounce of gold is immediately recognised and highly valued. At the same time, the value of a Bitcoin is volatile and the subject of endless debate. Gold has been sought after and valued for more than five millennia, while Bitcoin has only been around for just over 15 years.

Elon Musk warns that the US government debt is eventually going to result in a collapse of the US dollar and hence a massive increase in the price of cryptos. While we agree that the US dollar is weakening and has been for most of this year, over the long term it has held its value. For example, in April 1990, the US dollar bought you 160 Japanese yen and today it buys you 155,8 yen. In May 2003, one US dollar was worth about 87 euro cents. Today it is trading for 85.40 euro cents.

In 1987 economists and investors were very concerned about the level of debt in America as the US government's borrowing reached $3 trillion and they warned of the imminent collapse of the economy. Today, 38 years later, the US national debt is $38,74 trillion and rising rapidly.  The same experts and fear-mongers are again warning of the economy’s imminent demise.

Certainly, the US budget deficit is a concern, but we do not believe that it portends the collapse of the US economy any time soon. In our view, the US economy is being supported by the massive productivity benefits which are flowing from new technologies and particularly the spread of AI through the economy.

The Bitcoin price has itself collapsed over the last 10 weeks from its peak of $125265 to current levels of around $90 000 and it has been as low as $83268 (21-11-25). That’s a fall of 33,5%. Consider the chart:

The Nobel prize-winning economist, Professor Paul Krugman, suggests that the fall of crypto prices is directly linked to fall in Trump’s influence and power in America. He may well be right. There can be little doubt the Trump and MAGA movement have suffered some significant set-backs this year and that the excitement that his return to the White House created for cryptocurrencies has abated. There can also be little doubt that the big players are getting out of Bitcoin or as Krugman puts it, “...the Trump trade is unwinding”.

The rapid rise of the gold price since March 2024 definitely indicates that big international investors are worried about the future of paper assets. Why else would they give up the interest which they could earn on government Treasury bills and put their wealth into gold? But perhaps, instead of a collapsing US economy, they are seeing the inevitable inflation which will result from a world economy that is moving into a powerful boom phase, driven by rapidly increasing productivity levels.

Perhaps the only lesson we can learn from all of this is that cryptos are not in any sense a hedge. Rather, they are a rich man’s speculative plaything – to be abandoned whenever belief levels falter. And Musk’s economic opinions are about as reliable and consistent as his political opinions. He is undoubtedly an engineering genius – but that does not automatically make him an expert in social media, politics or economics.