Gold And Platinum Surge As Mining Unrest Spreads

Today’s AM fix was USD 1,662.50, EUR 1,324.07, and GBP 1,047.57per ounce.
Yesterday’s AM fix was USD 1,640.50, EUR 1,315.87 and GBP 1,038.49 per ounce.

Silver is trading at $30.36/oz, €24.30/oz and £19.31/oz. Platinum is trading at $1,543.75/oz, palladium at $628.10/oz and rhodium at $1,025/oz.

Gold surged $17.10 or 1.04% in New York yesterday and closed at $1,654.40. Silver surged to a high of $29.91 and finished with a gain of 1.91%.


Currency Ranked Returns – (Bloomberg)

Gold rose by over 1% to over $1,665/oz late Wednesday hitting prices not seen since early May as minutes from the US Federal Reserve meeting convinced market participants that QE3 is imminent.

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to the minutes from the July 31-Aug. 1 meeting.

Bullion prices have rallied for six days, moving through the technical resistance of the 150-day and 200-day moving averages. Gold hit the top of a 4 month trading range when it broke $1,640/oz.

Platinum and palladium also rallied for a 5th straight day on growing fears that violence due to labor issues will spread to other mines in South Africa and create increased supply shortages.

Year to date, despite much negative sentiment towards gold, dollar gold is up nearly 6%.  In January the yellow metal surged nearly 15% after the US Fed said it could unveil more stimulus and expected to keep interest rates near zero until 2014.

Similar moves may be seen again soon given the fundamentals.

Industrial unrest hobbling the South African platinum industry deepened yesterday, prompting fears of a broader mining crisis in one of the main platinum and gold producing countries.

Platinum and gold prices continued to soar partly due to real concerns of supply disruptions after 44 people died during strikes at a pit owned by  Lonmin.

About a fifth of global platinum production capacity is idled in South Africa today as the nation holds a day of mourning for 44 miners and policemen killed in the deadliest police violence since apartheid ended (see Newswire).

Massive discontent has spread to two other important platinum mines.

Amplats, the world’s largest platinum producer that is 80% owned by Anglo American, disclosed it had received demands for pay rises at its Thembelani mine. Meanwhile, another miner, Royal Bafokeng, said about 500 people were protesting outside its Rasimone mine, and preventing others from going to work.

It seems likely that the protests will spread from the platinum sector, to other sectors, including the gold mining sector.


Cross Currency Table – (Bloomberg)

A primary problem is that the price of platinum remains low from an inflation adjusted perspective and when compared to the massive cost increases to operate mines – in terms of fuel, electricity, machinery etc.  

Higher prices would mean that companies could pay their staff higher wages and alleviate some of the deepening industrial unrest in South Africa. 

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NEWSWIRE
(Bloomberg) — Gold Futures in India Climb to Record 30,699 Rupees Per 10 Grams
Gold futures in India advanced as much as 1.3 percent to a record 30,699 rupees per 10 grams. The October-delivery contract traded 1.1 percent higher at 30,638 rupees on the Multi Commodity Exchange of India Ltd. at 11:01 a.m. in Mumbai.

(Bloomberg) –China Central Bank Denies Report of Missing Gold
The People’s Bank of China said a report that the country is missing 80 tons of gold reserve is “totally rumor”, the official Xinhua News Agency reports, citing an unidentified official from the central bank. The report didn’t specify which media reported the gold was missing


Gold Prices/Fixes/Rates/Vols – (Bloomberg)

(Bloomberg) — Gold Above Moving Average Signals More Gains: Technical Analysis 
Gold’s climb above its 200-day moving average yesterday may be a “shot in the arm” for prices to rally toward $1,700 an ounce, according to technical analysis by CMC Markets U.K. Plc.

The attached chart shows the metal had been trading below its 200-day moving average since March. Prices held above the measure from the beginning of 2009 through the end of last year and were again above the level for about seven weeks from January. Gold closed about $11 an ounce above the moving average yesterday and was about $21 above it today.

“One could expect a fair amount of short covering coupled with buy orders north of this,” Brenda Kelly, a senior market strategist at CMC Markets in London, wrote in a report e-mailed yesterday, referring to the 200-day moving average. Short covering is purchases to end bets on lower prices. “A break and close above may well be the shot in the arm required if we are to retarget the $1,700 level.”

Bullion for immediate delivery reached a 16-week high of $1,665.31 today and was at $1,663.40 by 7:45 a.m. in London for a 6.4 percent gain this year, extending an 11-year rally. While that’s 13 percent below the record $1,921.15 set in September, it’s still five times more than a decade ago. Holdings in gold- backed exchange-traded products reached a record 2,442.3 metric tons yesterday, data compiled by Bloomberg show.

Bullion’s 14-day relative-strength index is at 71, above the level of 70 that indicates to some analysts who study such charts that a drop in prices may be imminent.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

(Bloomberg) — iShares Silver Trust Holdings Rose 51.24 Metric Tons Yesterday
Silver holdings in the iShares Silver Trust, the biggest exchange-traded fund backed by silver, rose 51.24 metric tons to 9,784.63 tons yesterday,  according to figures on the company’s website.

(Bloomberg) — One-Fifth of World’s Platinum Output Idled After Killings
About a fifth of global platinum production capacity was idled in South Africa today as the nation holds a day of mourning for 44 miners and policemen killed in the deadliest police violence since apartheid ended.

Impala Platinum Holdings Ltd., the second-largest producer, has suspended work for a day at the Rustenburg operation to enable workers to attend memorial services, it said in a statement. Rustenburg and Lonmin Plc’s Marikana mine, where police killed 34 protesters on Aug. 16, both tap the world’s richest platinum reserves, northwest of Johannesburg.

The police shootings occurred after 10 people, including two police officers, died in fighting among workers and union members during an illegal strike by drillers that started on Aug. 10. President Jacob Zuma declared a week of mourning and agreed to set up a judicial commission of inquiry after police fired on protesting workers armed with machetes and pistols.

“It is not acceptable for people to die where talks can be held,” Zuma told more than 1,000 striking miners yesterday, about 250 meters (820 feet) from the outcrop where the killings took place.

The violence highlighted investor concern about law and order in an economy that relies on mining for almost two-thirds of its exports. Producers of platinum in South Africa, which has the world’s largest reserves, have cut spending and idled mines following above-inflation cost increases and lower prices for the metal, used in jewelry and anti-pollution devices.

Main Service

The main memorial service will take place at the Nkaneng shanty town and starts at 11 a.m., the ministerial committee appointed by Zuma to help families of those who were killed said by e-mail yesterday. More services will be held throughout the country.

Zuma will name the members of the commission of inquiry by the end of the week, he said in a speech broadcast on Johannesburg-based SAFM radio yesterday.

The rock-drill operators are demanding that Lonmin increase their pay to 12,500 rand a month ($1,504). The protests turned violent because of rivalry between the emerging Association of Mineworkers and Construction Union and the dominant National Union of Mineworkers, according to Lonmin.

Worker discontent has spread to a nearby mine owned by Royal Bafokeng Platinum Ltd., with operations interrupted at the company’s North shaft yesterday after about 500 workers started an illegal strike, it said in a statement. Police said employees were demanding higher pay.

Worker Demands

Royal Bafokeng Investor Relations Manager Lindiwe Montshiwagae didn’t answer a call to her mobile phone. The situation at Marikana is calm today, Lonmin spokeswoman Susan Vey said by phone.

Anglo American Plc’s platinum unit, the world’s largest producer of the metal, said workers in South Africa made demands directly to the company on Aug. 17.

Lonmin has the capacity to produce about 750,000 ounces a year, mostly at its Marikana mine. Impala’s Rustenburg mine produced the same number in its last financial year. Impala in February estimated global annual supplies at about 7.7 million ounces.

Platinum has gained 5.7 percent to $1,557.95 an ounce so far this week, heading for its biggest weekly advance since the five days through Jan. 13.

NEWS
Gold jumps above $1,650; Fed minutes feed stimulus hopes – Reuters

Prices of gold near record high – Times of India

South African gold miners seek to sue mining companies – Yahoo

Pimco Fund Expands Gold Holding on Outlook for Inflation – Business Week

COMMENTARY
Some Gold Bulls See Bright Future – Wall Street Journal               

Gold and Silver Price Move: Is This The Real Thing? – Mineweb

Mayans Made Drought Worse With Crops – UPI

Marc Faber’s Forecasts For Global Economy – You Tube

The History Of The World’s FX Regimes In One Infographic – Zero Hedge


Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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