Gold And Platinum Surge As Mining Unrest Spreads

By: GoldCore

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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Yours sincerely,
Mark O'Byrne
Exective Director

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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