The insanity on Wall Street sent investors fleeing to safe-haven investments such as gold, which has benefited overall from the market’s volatility.

After meltdowns in banking, housing and commodities gold became the investment of choice because of its intrinsic stability compared with fiat currency. But what many investors may not know is that the decline in gold production over the past few years is expected to continue, potentially propping up gold prices for years to come.

In November 2008, the South African government said its gold production dropped by 8.7% compared with same month a year earlier.

As the world’s second largest gold producer behind China, the November drop in production remains indicative of the long-term energy and labor problems that show no sign of abating.

The crisis knocked South Africa out of the number-one gold producer spot in 2007, which it held for more than a century, when it was overtaken by China. Without a steady source of electricity, it’s unlikely that South Africa will be able to reclaim its crown.

South Africa’s public electricity company Eskom operates a feeble infrastructure unable to keep up with demand. Power failures have caused South African mines to shut down for days.  The power crisis is expected to persist at least until 2012.

Compounding South Africa’s dilemma is that experts believe all the easy gold has already been mined – meaning that the producers have to dig to record depths. While this certainly increases the cost of doing businesses, deeper mining means more power requirements.

The downward trend in South Africa’s output saw a 15% decline in production last year alone.

Supply has now tumbled by more than 75% from the all-time peak of 1,000 tonnes mined in 1970, when South Africa supplied 80% of the world’s gold.

Yes, gold is always subject to fluctuations, but the long-term prospects make it almost a sure winner.