Can South Africa gold miners push futures prices over $1000?

Mid-day February 11, 2008 gold futures prices have risen to $927. Gold continues to move forward, taking many of the gold stocks along with it. In fact speculation in the most precious yellow metal has grown dramatically on a global level. In China, Beijing Caishikou Department Store sold out of two tones of gold bars in less than 2 hours.

“The real value of gold is not that it provides a quick, speculative fix, but its capacity to provide a sure and steady means of protecting wealth and to enhance risk-adjusted returns,” said Hou Huimin, vice-chairman of China Gold Association.

With a weak dollar, spikes in oil prices - which are consistently above year ago levels, and an outlook of an unknown time period for an American recession gold hedges seem more attractive everywhere. And outside factors continue to add to this upward trend in prices.

Already the effect of Venezuelan President Hugo Chavez threatening to cut America off from that nations oil supply has added to the price of oil, while power shortages in South Africa have forced many mining companies to lower production, boosting in turn platinum and gold futures. This is having a net effect being seen in the Philadelphia Gold and Silver Index rising .73%, along with the CBOE Gold Index up .26% and the Amex Gold Bugs Index up .76%

Will the gold mining stocks of South Africa take a hit? Of course, and many other mining stocks will drop along with them. But that is hardly an indication of a bear market any more than the fact that once those mines are back online gold spot prices will drop. In a few weeks supply and demand factors will shift again with the aforementioned miners increasing supply. But the real factors moving gold in all the various investment markets is not the short-term actions that are the fodder of traders.

Protecting wealth and risk adjusted returns are the main concern right now as global markets look weaker by the day. With global instability and the other factors that are growing with no end in sight, I believe that gold will continue to increase in price. $1000 gold spot prices are not the top in my opinion but a stepping stone to a higher level. Whether shortages due to difficulty in mining or nature, increased demand in emerging markets like India and China, or economic weakness and general bear markets in stock markers globally I do not see a substantial retreat of gold or gold stocks in 2008.