Gold is heading for its seventh weekly gain as it benefits from a relatively weak dollar and inflation expectations globally.
Bullion, valued by investors in times of crisis as a safe haven and also a hedge against inflation, has experienced a surge in demand and trading closer to $1,900 an ounce, its all time high reached nine years ago at the height of the European sovereign debt crisis.
“Gold is high now because interest rates are low, lower than inflation and people want to put their money in something that is not devaluing. And when you devalue a currency, gold always goes up to take its place,” Peter Major, mining director at Mergence Corporate Solutions, said.
“They [investors] know everyone is printing a lot of money but they don’t know how much. Its all speculation at this point, if we find more facts, then gold will find a balance. But right now, with all this uncertainty people are afraid to be short of gold. The market is really scared.”
Whether South Africa would benefit from the higher gold prices coupled with a weaker rand, Major said the problem is that the country was no longer a major player in the world's gold production.
“There are a few active gold mines and one or two will surely close next year. The mines that are open are benefiting but the country is not benefiting that much anymore as we used to produce 70% of the world’s gold and now we produce 3%,” he added.