The gold price has jumped from the mid $600s to around $920 today in just four months and there’s only one question now that needs answering… has the price of the yellow metal got further to go..?

My answer is a resounding YES. Let me tell you why.

Consider why the price of gold has been rising over the past few months…

Price increases are being driven by concerns over inflation, global political unrest, weakness in the US dollar and concerns over unstable financial conditions.

Then ask yourself one question… do you see any of these factors easing in the short to medium term..?

Biofuels and population growth are causing food prices to soar… Pakistan test-fired a medium-range ballistic missile today and Afghanistan and Iraq are a mess… US interest rates are likely to move lower… and credit crunch victims are still entering the confessional…

Then there are the fundamental factors to consider…

Production trends are negative… there is a gradual reduction in global mine output, continued strong growth in jewellery demand, a strong desire on the part of investors to diversify their portfolios and the much easier access to gold for investment purposes.

So, the basic laws of economics also look set to drive the price higher.

But it is not any of these factors that have driven the price of gold to its highest level ever… it’s all down to an energy crunch that is hitting South Africa… and this energy crunch does not look like easing soon.

The country is facing a major power crisis and rolling blackouts are the order of the day. I have experience of something similar myself when I lived in Tanzania in the 1990s.

The country was having difficulty with a hydroelectric dam and the power was off 12 hours a day. Not only was this inconvenient for washing and cooking (my house in Dar es Salaam had an electric water pump) but it meant it was nigh on impossible to get any business done.

Storeholders and traders were bankrupting themselves renting generators and buying fuel… this resulted in petrol shortages… factories had to close… It was, in short, a disaster for the Tanzanian people and their economy.

Well, it looks like a similar thing is happening in South Africa, but the country is in a more difficult position than Tanzania was in the 1990s. Tanzania’s hydroelectric power station had seen its lake dry up because of a drought… South Africa is in trouble because it is almost out of capacity…

The fortunes of South Africa and gold are intertwined

In 2007, South Africa’s gold production fell 8% to 272 metric tons, according to recent data from precious metals consultancy GFMS. This actually caused a relegation of the country in the gold producers league. South Africa is now the world’s second-largest gold producer after China leapfrogged into first position in 2007, producing 276 metric tons, a year-on-year rise of 12%.

Nevertheless, South Africa remains one of the key gold producing nations in the world… but the power crisis could cause the country to fall further and further down the producers table… and cause the gold price to soar even more as its supply side creaks under the country’s insufficient infrastructure.

It was announced this morning that South Africa's three main gold producers and the world's biggest platinum miner had suspended production at ALL their mines in the country due to the power crisis.

South Africa's President Thabo Mbeki will have to sort it out. Unfortunately, there is one problem here. Mbeki is a moron.

He has not stepped in to help the poor, downtrodden people of Zimbabwe… He won’t accepts that HIV causes AIDS and believes the disease is really caused by poverty and you should therefore treat poverty rather than dish out anti-retrovirals. He is a fool of staggering proportions.

South African power group Eskom indicated it will hike power prices by more than 14% in a bid to meet its investment schedule… and it has warned of further rises ahead.

As domestic electricity supply reached its limit this weekend, South Africa suffered crippling backouts and electricity exports to neighbouring Botswana and Zimbabwe were stopped. This led to a wider grid failure affecting Zambia.

All of this is going to take time to resolve. I have worked in Africa and I know about doing business there…. don’t hold your breath; particularly with the current “comedy” leadership (which leaves me unable to laugh).

The country has developed an ambitious plan to expand its use of nuclear power. According to the Nuclear Energy Corporation of South Africa (Necsa) it expects 12 full-size 1000 MWe reactors to be in operation by 2030, along with 24 pebble bed reactors.

Unfortunately, these will not be on stream any time soon. Until then, “load shedding” – or rolling blackouts to you and I – will continue. South African industry will suffer, which is a shame, but it’s just one factor of many that will continue to support the gold price.

So, where DO you think the gold price is heading...? P.S. If you enjoyed this article then sign up for Smart Commodities UK. It’s dedicated to searching out the investment trends that could provide our biggest profit opportunities for the next decade…

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