Rand Drops Again as Gold Climbs to Record Highs

Feb 29th, 2008

Reported by Kimberly Birkland

As U.S.'s recession curbed investor demand for high-yielding assets, the South African rand fell against the dollar, dropping to a 1.5 year low.  Slipping against all the 16 most actively-traded currencies this past week after write downs at Switzerland's Credit Suisse Group and lower profit at Barclay's Place prompted investors to pare holdings of emerging-market assets.  The rand also fell on speculation that the Fed will cut interest rates to stave off an economic slowdown in the world's biggest economy. 

Michael Keenan, chief currency strategist at Standard Bank Group Ltd. in Johannesburg said,

"The rand is still at the mercy of a gloomy outlook for the global economy and uncertainty about domestic fundamentals.  Fears the U.S. economy is in trouble, as well as a surprise relaxation in South Africa's exchange controls, have pushed the rand down this week."

Gold and platinum reached record highs in London on February 21st and platinum reached a historic high on the 19th.  South Africa produces a 10th of the world's gold and about 80 percent of its platinum.

Gold, little changed in London, headed for its biggest weekly advance in 19 months as the lower US interest rates may revive investor demand for the metal as an alternative to the dollar.  Platinum dropped from a record.  (Bloombergnews.com)

The dollar declined to a three-week low against the euro on speculation U.S. economic growth will slow, forcing the Federal Reserve to lower interest rates. 

Platinum is actually falling on speculation that record prices will decrease demand for jewelry made from the precious metal.  Palladium also dropped.

Jewelers use about a quarter of the world's platinum and are the second largest consumers after carmakers.  Carmakers include the precious metal in catalysts.  The amount of platinum used in jewelry declined for five consecutive years through 2007, as prices have advanced on the precious metal.

Rhodium, a by-product of platinum mining and also used in auto catalysts, was unchanged today at a record $9,080 an ounce, according to prices from Johnson Matthey.