Gold News

Gold Hits New Record Highs vs. Dollar & Euro; South African Mining Shut Down by Power Outage

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.

Asian-Pacific stock markets meantime rose 4.4% on the MSCI index, but despite Tokyo's best one-day performance since 2002, the Nikkei index still finished the session 1.7% lower from last Friday's close.

Japanese equities remain more than 7% below their start of this month.

"The massive retracement in the stock markets on Monday, as in the past, led to gold losing ground," notes Wolfgang Wrzesniok-Rossbach in today's Precious Metals Weekly from Heraeus, the German refining group.

"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 CHF1,009 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.

A parliamentary report due out tomorrow will blame the City watchdog – the Financial Services Authority – for failing to spot the flaws in Northern Rock’s business model, reports the Financial Times.

The over-geared mortgage lender suffered the UK's first banking run in 130 years last summer when the global credit crunch first bit. Alistair Darling, the UK chancellor, also "takes flak" says the paper.

The European single currency today held steady against the US Dollar at $1.4740, little changed from Thursday's Wall Street finish, while Europe's largest 300 blue-chip stocks began the day 1.9% higher on average, led by a final takeover of UK brewer S&N by the Danish Carlsberg group.

The broad FTSE Eurofirst index remains one-tenth below its start of Jan. 2nd.

Crude oil broke back above $90 per barrel in early trade, rising by more than 4% from Wednesday, when Washington agreed a series of tax rebates aimed at stimulating the US economy. But US government bonds were unchanged after ending their two-day decline overnight.

"I plan to buy," said a trader at Mitsubishi in Tokyo to Bloomberg today. "The US economy is weak. Treasuries are still a safe haven."

But US bond prices are now so high, the 10-year Treasury yields 0.4% less than the latest reading of US consumer-price rises.

Two-year US bonds offer to pay a negative yield of 1.83% per year after inflation.

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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