The gold price surged to a new record high yesterday as South African miners halted operations due to acute power shortages in the country, fuelling further gains in precious metal prices.
Concerns about the US dollar, oil prices, inflation and an impending recession have triggered a spike in the price of precious metals like gold, silver, platinum and palladium. Gold, which hit a new record high when it broke through the $900 level earlier this month, is the classic hedge against instability in equity markets and inflation and, because it is priced in dollars, holders of other currencies benefit from a weakness in the US currency.
The gold price hit $923.60 per ounce for the first time yesterday and traders began raising the prospect of the psychological $1,000 level being breached over the coming weeks.
"Gold is now technically in uncharted blue sky territory but the big round figure of $1,000 gold, much like $100 oil, looks to be reached sooner than many analysts had expected," said Mark O'Byrne, executive director of Gold and Silver Investments. Silver and platinum also rose in price yesterday with silver at a 27-year high and platinum hitting $1,698.
Although the price of precious metals has rocketed on recession fears over recent weeks, yesterday's upswing was triggered by South Africa's power woes. It is the world's second-largest gold producer behind China and news that AngloGold Ashanti, Gold Fields and Harmony – some of the country's largest producers – had stopped production due to a lack of power added steam to the precious metals boom.
Power is essential for mining companies as large amounts are needed to hoist workers up mine shafts and for cooling at extreme depths. Eskom, the South African utility company, has blamed the outages on ageing infrastructure and coal shortages and said problems could persist for another five years.