South Africa's commodity-linked rand strengthened in early trade on Monday, edging closer to a 16-per-dollar level thanks to record gold prices, while traders awaited the central bank's first rate-setting meeting this year.

At 0703 GMT the rand traded at 16.0475 against the dollar, roughly up by 0.4% on its previous close and hovering around its strongest level since June 2022.

While the greenback weakened slightly against a basket of currencies, gold surged to a record high above $5 000 an ounce on Monday, extending a historic rally as investors piled into the safe-haven asset amid rising geopolitical uncertainties.

The risk-sensitive rand, which often tracks major global drivers such as US policy, has gained around 3% against the US dollar since the start of 2026.

Investor attention will mainly be pinned on the South African Reserve Bank's first interest rate meeting for 2026 on Thursday for clues on its monetary policy posture.

The SARB cut its main lending rate by 25 basis points in November saying that there was scope to make its policy stance less restrictive, in the context of an improved inflation outlook.

ETM Analytics said in a note that the local currency's exposure to gold, platinum and other metals and commodities that have also moved inversely to the USD could help it punch through the 16.00 per dollar level this week.

"(This will) give the SARB something to think about as they deliberate whether there is enough room to cut rates so early in the year, despite the inflation rate remaining well above the 3% inflation target," said the note.

South Africa's benchmark 2035 government bond also strengthened in early deals, as the yield fell 7.5 basis points to 8.07%.