By Jason Simpkins
As the market continues to struggle, gold and platinum have been proving their worth as investment hedges.
The price of platinum extended its record run yesterday [Thursday], climbing to $1,851.50 an ounce in early morning trading in London, Thomson Financial reported. It stood at $1,841, up $22 at 11:00 a.m. in New York.
Gold came along for the ride as it climbed $7.50 to $912.50 an ounce at midday. Gold has soared by almost $300 since credit markets began deteriorating last summer. It set a record of $936.60 an ounce last Friday.
Prices received a charge over the past two weeks as power shortages in South Africa forced mining companies to curtail energy usage by at least 10%.
"The platinum price has been driven to record levels by flooding and power shortages in [South Africa]. This has seen strong investor buying," Tom Kendall, precious metals strategist at Mitsubishi Corp. told Business Day.
South Africa provides four-fifths of the world's platinum, and is second only to China in gold production.
"It's premature to say at this stage what the production consequences of operating within 90% power constraint is," Trevor Raymond, spokesman for Anglo Platinum (OTC: AGPPY) said earlier this week. Anglo is one of the world's largest platinum producers.
Anglo Platinum recently said output at its Amandelbult mine was diminished by flooding, and it may be three months before it comes back on line. The mine could lose 50,000 to 70,000 ounces of production, an amount comparable to four days worth of world supply.
"It's kind of a perfect storm," Wolfgang Wrzesniok-Rossbach told Bloomberg News. "There are absolutely no platinum reserves, so any supply disruption will have an impact."
Some experts believe the annual deficit could climb as high as 400,000 ounces, which would drive the price of platinum beyond $2,000 an ounce for the first time.
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South Africa's Power Problems Send Commodity Prices Soaring