Salient Features Of The South African Gold Market
Mining is the base of the whole economy of South Africa. There are abundant mines of mines precious metals like gold, copper, platinum, and diamonds. The British laws still govern the economy, and the gold market of South Africa, as it is a former British colony. The white men own most of the mines in South Africa even today. Most of the natives of the region are employed there as labourers, and a very few number of them is working on managerial posts.
The South African gold market is 120 years old. It has seen a continuous cycle of ebbs, and falls in its economic history. Like many other countries, it depended upon the London bullion market to sell its gold to the global gold market. Individual gold mining companies and brokers marketed gold through London.
Then the gold market of South Africa was taken over by the reserve bank of South Africa, which now controls it. After the First World War, it used The Bank of England, as its selling agent to channel gold to the London bullion market.
The London gold market remained closed for two weeks in the year 1968 during the Vietnam conflict. It reopened in after two weeks, and changed the future of the gold market forever. Due to all this, it has lost many of its valuable clients. The Zurich gold pool was formed by the three main Swiss banks, and they asked the South African reserve bank to trade its gold through them. To this day, Switzerland is thought to be a place that handles most of the gold that is produced in South Africa, in the global market.
The second largest gold reserves of the world are in South Africa. They were the manufacturer of half of the total gold produced in the world in the beginning. However, the production of gold has slowed down in South Africa due to many reasons even the cost of gold mining is still low in South Africa. Because of the gold rush in California, and Australia, the gold mining companies have shifted their focus there.
Gold mining is anyway a difficult job, and in a country like South Africa, where the geological factors make it unbearable to work, the instability of the country further hampers the growth of gold mining industry. The geothermal temperature is more than 50 degree Celsius.
There is a lot of water required to be pumped in order to keep the inner temperature at a cooler level. Dynamite and cyanide is also required in huge quantities to blast the mines, and then extract gold from them. There is also the need of uninterrupted power supply for the whole process of refining.
So altogether, the cost of mining and processing raw gold is extravagant for the government. With its limited resources, and insufficient power supply, coupled with the civil wars, and political instability, it has failed to deliver a prospective gold market. Rand, the South African currency is constantly losing its value against other currencies. The gold market has not yet shown signs of recovery, but the government is initiating projects like thermal power stations to generate more electricity for the gold mines to increase their production by the year 2010.
Jack Wagon is a gold investment consultant. Learn how to buy gold in the times of recession. For more information visit his recommended website at http://www.goldmadesimple.com/.
