Gold and platinum prices surged to new records on Friday on deteriorating electricity shortages in South Africa, a top producer of the precious metals, increased the supply demand.
An ounce of gold for February delivery spiked to $924.30, a fresh record, in electronic trading on the New York Mercantile Exchange during the days trading before closing at $910.70, up $4.90. Gold contract gained $29 on the week from last Friday's closing level of $881.70 and $916.10 an ounce on January 15.
Platinum for April delivery jumped as high as $1,694.90, a new record. Platinum rallied $67.10, or over 4 percent, to end at $1,680.10 an ounce.
Leading South African mining companies were forced to suspend operations today after they agreed to cut use of electricity at the request of the state-run utility Eskom. The company, which supplies 95 percent of the country's electricity, said it is struggling to generate enough power to meet demands.
Eskom asked its 138 biggest industrial customers to reduce their electricity usage to the minimum level possible and said the situation is likely to last another two to four weeks.
South Africa's Public Enterprises Minister Alec Erwin described the power shortages as a national emergency, according to BBC News.
The news out of South Africa is very significant as every supply line for gold is imperative and now this news will likely set up gold to trade $1000 in very short order, said Kevin Kerr, president of Kerrtrade.com said.
AngloGold Ashanti, Gold Fields, Harmony Gold and the world's two largest platinum producers, Impala Platinum and Anglo Platinum, were all hit by the power problems.
South Africa is the world's largest producer of platinum and second-largest gold producer after China, largest last year. South Africa had been the top producer since 1905 but production dropped 8 percent to 272 metric tons last year, while China produced 276 metric tons of gold, an increase of 12 percent from the year-ago .
Ian Cockerill, chief executive of Gold Fields, said in a statement the company was working at survival rates which will only keep the mines pumped out and ventilated.
We don't know how long this will be. We are looking at various scenarios such as limited production and concentrating on higher-value areas, Mr Cockerill said.
The countries mining companies were left affected by the power cuts. Shares of Gold Fields Ltd. dropped 9 percent at $15.19, AngloGold Ashanti lost 5.5 percent at $42.68, Anglo American Plc tumbled 6 percent at $25.41, and Harmony Gold Mining Ltd lost 7 percent at $10.92.