South African Gold Mining Strikes As Peak Gold Production Collapse Continues

Today’s AM fix was USD 1,391.25, EUR 1,052.46 and GBP 893.14 per ounce.
Friday’s AM fix was USD 1,392.75, EUR 1,051.85 and GBP 899.19 per ounce.  

Gold fell $12.80 or 0.91% Friday, closing at $1,394.30/oz. Silver fell $0.42 or 1.76%, closing at $23.43. Platinum rose $3.04 or 0.2% to $1,516.74/oz, while palladium was down $14.76 or 2% to $719.22/oz. 


Gold in USD, 3 Day – (GoldCore)

For the week, gold and silver were both down 0.14% and 2.29% respectively.

Gold prices rallied $83.10, or 6.3%, in August. Silver surged 19.5% over the month.

Gold futures rose momentarily on the open in Asia prior to being hammered lower. Gold rose from Friday’s close at $1,395.05 to $1,397.20/oz prior to a wave of selling that sent gold plummeting.

Gold fell for December delivery declined as much as 1.4% to 276.2 yuan/gram on the Shanghai Futures Exchange. Gold fell by more than $20 to $1,373.40/oz prior to a quick recovery in volatile trade (see chart). Silver saw similar trading action but has recovered all the initial losses and surged over 2.7% which bodes well for trading today. 

The less imminent risk of a war with Syria has increased risk appetite and led to higher stock markets and some profit taking and selling by speculators with a focus on the short term.

Banks, hedge funds and other large speculators increased their net-long position in New York gold futures in the week ended August 27, according to U.S. Commodity Futures Trading Commission (CFTC) data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 78,289 contracts on the Comex. Net-long positions rose by 17,893 contracts, or 30%, from a week earlier.

Miners, producers, jewelers and other commercial users were net short 87,638 contracts, an increase of 19,973 contracts, or 30%, from the previous week. 

In silver futures, net long positions decreased last week according to the CFTC data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 16,380 contracts on the Comex.  Net-long positions fell by 2,128 contracts, or 11%, from a week earlier.

Miners, producers, jewelers and other commercial users were net short 24,374 contracts, an increase of 1,100 contracts, or 5%, from the previous week. 


Gold in USD, 1 Year – (GoldCore)

South Africa’s National Union of Mineworkers, which represents about two thirds of gold miners in the country, will start a strike over pay from tomorrow. 

South African gold mining companies are liaising with police regarding the strikes which are set to start tomorrow.  The miners are liaising with police “on the highest level” to maintain peace, Charmane Russell, external spokeswoman for Chamber of Mines at Russell & Associates, told Bloomberg by phone. 

There are concerns of unrest after the Marikana platinum massacre last year, when dozens of miners were shot dead by South African police in the worst mining violence in decades.

South Africa was throughout the 20th century and as recently as 1996, the world’s largest gold producer at almost  17 million ounces. South Africa has in recent years become less important to the  global gold industry. However, should supplies be further hampered it may impact the already, very tight physical gold market.


South African Gold Production – (South African Journal of Science
)

South Africa now ranks sixth in gold production year to date, on a pace of  just more than 5 million  ounces of annual production,  just ahead of Papua New Guinea and behind China, Australia, United States, Russia and Peru.

South Africa produced over 1,000 tonnes of gold in 1970 but production has fallen an incredible 75% , to below 250 tonnes in recent years (see chart above). This collapse sees gold production at levels last seen in 1922. This has happened despite the massive technological advances of recent years, more intensive mining practices and a far greater availability of capital.

Recently, the decline in South African gold production has been attributed to national electrical issues and power outages, operational delays, safety issues and industrial unrest. However, the scale of decline at a time when there has not been a corresponding decline in base metals mined in South Africa suggests that geological constraints may be leading to lower production of gold and other precious metals.

Other large gold producing nations are also seeing declines (see table below).

Peak oil is a phenomenon many will be aware of – peak gold remains a foreign concept to most.

Peak gold is the date at which the maximum rate of global gold extraction is reached, after which the rate of global production enters terminal decline. The term derives from the Hubbert peak of a resource.


Global Gold Production – (Bloomberg)

The geological evidence suggests that we may be close to peak gold. It is signalled in the fact that most of the larger gold producing countries (such as Australia, the U.S., South Africa, Canada, Peru, Indonesia) have all seen production drops in recent years. China and Russia are the two only large producers to have seen production increases.

Peak gold has yet to be considered and analysed by the international financial and investment community but there is a risk that it has happened or will happen soon with a consequent impact on the gold mining industry and on gold prices in the 21st Century.

NEWS
"Entering seasonal sweet spot for gold as September and November are two of gold’s strongest months" – Market Watch

Gold falls 1% as possible U.S. strike on Syria delayed
– Reuters

Gold, Silver Soar in August; US Mint Silver Bullion Sales Strong – Coin News

Gold Bulls Increase Wagers to Highest Since January – Bloomberg

COMMENTARY
Asian Bonds Tumble Below Par in Capital Flight – Bloomberg

Gold Price Will Shock Most Observers – GoldSeek

Guess Which "Bearish" Bank Bought A Record Amount Of GLD In Q2 – Zero Hedge

More Evidence That JPM Has Cornered Comex Gold – TF Metals Report

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Mark O'Byrne

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