Commodity prices are surging on expectations that the US Federal Reserve will pump more money into the US economy to keep interest rates low.
The Reuters Jefferies CRB index, a benchmark of commodity prices, leapt to 296.42 points late yesterday from 287.3 on Thursday, and a recent low of 261.8 on August 25.
The latest jump came after the release of weak US jobs data on Friday, which analysts believe will trigger more monetary easing in the US.
However, lower mining volumes mean South Africa may be losing out on the boom as it did when commodity prices soared between 2006 and 2008.
Statistics SA said mining production fell 1 percent in July. And in the three months to July production fell nearly 5 percent compared with the previous quarter, after adjustments for seasonal factors.
Walter de Wet, the head of commodities research at Standard Bank, said volumes of gold and platinum mined were on a declining trend. "Platinum supply peaked at 5.3 million ounces in 2006."
The figure had dropped to 4.7 million last year and De Wet predicted it would be a bit lower this year. Gold volumes, he said, had fallen to 219 tons last year from é tons in 2008.
In the case of gold, he said, the main reason for the fall in production was declining ore grades, which made mining much more expensive.
Platinum production was lower because of recent under investment after the platinum price fell to a low of $771 (R5 ë) an ounce two years ago, after peaking at over $2 200 in March 2008. Because mining companies are failing to take full advantage of the higher prices, the trade account will not benefit as it has from past price windfalls.
The impact on the current account is difficult to quantify: exports will benefit but the run up in oil prices will boost the import bill. The impact also depends on the relative rate at which prices of different commodities rise.
De Wet said, in the year to date, the gold price had risen 23.3 percent in dollar terms, while the price of Brent crude oil was up only 8.3 percent.
However, the oil price has started to gain momentum and gold is losing the relative advantage. De Wet said over the past month the oil price had risen 8 percent, while the gold price had risen 8.5 percent.
An analyst who did not want to be named said precious metals prices had been boosted by exchange-traded funds and had become more volatile. She said the increased volatility was likely to be a permanent feature of the market.
Prices were rising as part of a "structural commodity bull market" that had started in 2003 and had been interrupted by the 2008 financial crisis. She said long-term price cycles lasted from seven to 14 years.