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Gold hits new record highs

Spot Gold Prices rose 1.2% overnight Friday, reaching new all-time highs just shy of $923 per ounce as all gold-mining operations in South Africa – the world’s No.2 producer – were shut down by a power shortage.

State-owned energy firm Eskom today told AngloGold Ashanti, Gold Fields and Harmony Mining that it can not guarantee power supplies to their mines. “This will have an impact on productivity as well as on operating costs,” said the Chamber of Mines in Johannesburg. “It is not clear when the workers will resume their underground shifts,” the Chamber added. Eskom had previously said it would only be unable to supply new mining operations between now and 2013.

The South African government today declared the power outage “a national emergency.” By the London opening today, gold had also hit a series of new record highs against all other major currencies barring the Canadian Dollar and Japanese Yen, breaking £465.50 for British investors, €626 for European buyers, and reaching $1,044 against the Australian Dollar.

“Keeping in mind gold’s role as a ‘crisis metal’ this seemingly irrational behavior is perhaps explained by the market having to find quick liquidity to settle losses elsewhere. For next week we expect this relationship between the stock markets and gold to continue. However, we then expect gold to continue its upward move...perhaps getting as far as $975 an ounce in this first quarter of 2008, before it comes under pressure from a global recession later in the year.” Priced against the Swiss Franc, Gold today broke its high two weeks ago to reach 1,009 Swiss franch per ounce. The metal has now doubled since Jan. 2004 against the formerly gold-backed Swiss currency. At the Tocom in Tokyo on Friday, all Gold Market futures contracts leapt by ¥120 per gram – the maximum “limit up” permitted by the exchange. Trading in gold for delivery in Dec. '08 was suspended at the equivalent of $920.86 per ounce.

Over on the currency markets, meantime, the Yen continued to weaken from Wednesday’s 30-month high vs. the Dollar. The Japanese currency also ticked lower against the British Pound, standing 4% below this week’s 19-month highs despite a raft of bad news for UK investment confidence. (Bullion Vault)