A London investment manager expects that tightness in the gold supply could send prices soaring to new records that could affect exchange traded funds (ETFs), particularly those that hold the precious metal.

Gold has taken a step back in the last several trading days, but appears to be making a climb once again. On Tuesday, it traded at $931.60. Today, it’s at $949.10. Those prices are a bit off the record level of $1,030.80 that was reached on March 17, reports Sitaraman Shankar for Reuters.

Tight supply of the commodity is the main reason for any price spikes. A fund manager at BlackRock says that production is likely to keep declining, and there haven’t been enough gold discoveries to replace what’s being mined.

Further putting a damper on gold supplies is that much of the supply resides in South America, which has high political risk, and South Africa, which is experiencing disruptive power outages.

Gold ETFs are higher today:

• streetTRACKS Gold Shares (GLD)
• iShares COMEX Gold Trust (IAU)
• Market Vectors Gold Miners (GDX)

For full disclosure, some of Tom Lydon’s clients own shares of GLD.

Tags: Commodity ETFs, GLD, IAU, Latin America, Material ETFs, Metals & Mining, South Africa