20091201

LONDON (Reuters) - It is time to differentiate South Africa from other commodity producers as political factors look set to conspire to weaken the rand.

The price of gold, of which South Africa is a major producer, is clearly important to the rand. Gold has had a fantastic run and hit a record high of $1,194.90 last Thursday. But the pullbacks can be brutal.

The metal fell to $1,136.80 on Friday as investors sought safety in dollars on concerns over the Dubai debt crisis. The rand followed suit, falling two percent against the dollar to 7.6450 before rallying to 7.41 as European worries over Dubai eased .

Traders who feel the gold price is frothy should be looking to go long dollars against the rand, which has risen 21 percent versus the greenback this year.

At the same time, South Africa may be finding that their golden goose is running out of eggs. They may face "peak gold".

A widely-quoted South African Journal of Science article recently highlighted problems besetting the country's gold mining industry. South African gold output peaked in 1970 at 1,000 tonnes, some 75 percent of world production. In 2008, it mined 233 tonnes, around 10 percent of the world's gold supply.

According to the Journal article, South Africa's remaining recoverable gold reserves are only 2,948 tonnes. If South Africa's golden age is indeed ending, the rand will endure long-term structural weakness as a bulwark of the South African economy erodes.

But there are other more immediate factors that will weigh on the currency.