Gold and platinum prices hit a new high on Friday, as one of South Africa’s main metal mines was forced to shut down because of a lack of power, which could affect focused exchange traded funds (ETFs), such as the streetTRACKS Gold (GLD).
Gold in London was pushed to a spot price of $923.40 a troy ounce, and mining executives are calling for a six-week halt as electricity will be rationed with only 50% of South Africa’s needs being met, reports Alec Russell for Financial Times.
Other gold ETFs that could be affected by the halt are:
Meanwhile, gold has also been the safe harbor of choice by investors, and with the current state of disarray among global markets, the precious metal will be in demand. Bud Conrad and David Galland for HoweStreet report that as we seem primed to enter a period of stagflation: a term that refers to a general economic slowdown, but coupled with rising prices by massive infusions of liquidity into the market.
Climbing prices make stagflation a positive environment for gold, and gold is typically seen as a "safety net" against inflation. However, in a typical recession, demand for everything slows. Will that include gold? No one can really say: there is no historical precedent that demonstrates gold will fall during a recession.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.