Fed tests gold upleg
Gold’s outlook and fundamentals remain really bullish.
A prolonged strike at South Africa’s PGM mines is finally beginning to impact prices of the metals.
Workers at the world’s three largest platinum producers, Anglo American Platinum (LON:AAL), Imapala Platinumm (OTCMKTS:IMPUY) and Lonmin (LON:LMI), have been on strike for more than three weeks.
Together the South African companies’ mines produce 3.5 million ounces in 2012; almost 60% of the world’s platinum. South Africa together with Russia control more than three-quarters of world supply.
After a subdued reaction at first – blamed on the huge inventories built up at the largest producers and in Nymex warehouses – the threat of dwindling supply is now pushing up PGM prices, albeit modestly.
The spot platinum price on Nymex in New York rose again on Monday to trade at $1,428.40 after earlier in the day hitting a 3-week high and is now up 4% for the year.
The price of palladium, last trading at $736, has also gained momentum with the metal trading higher for nine straight sessions.
Estimates point to roughly 10,000 ounces of platinum and 5,000 ounces of palladium production lost each day due to the strikes, which does not seem close to resolution.
Implats now says it can supply customers to end of March, but not beyond. The number two producer said the strikes could drag on into May.
“If strikes continue into May, we believe that mines may need to source metal from the open market, or fail to deliver on contracts,” a research note by Standard Bank analyst Walter de Wet argued on Friday.
“While this may be bullish, we still believe the metal is available, it is just a question of at what price level holders of above-ground metal will part with their metal,” he added.
Over the last two years following deadly clashes at a Lonmine mine in the country, the three companies lost a combined 880,000 ounces due to strikes and labour unrest, but the shaky mine supply picture has not moved the price much.
That’s because of a slump at the number one customer for platinum – the European auto industry – and above ground stocks of as much as 4 million ounces of platinum.
As the stockpiles begin to dwindle and the EU industry turns around, price could move higher, but a lot of ground still needs to be covered.
Compared to this time last year platinum, used primarily for emission reduction in autos and also in television and computer screens and jewelry, is down 16.6%. Palladium, used as an alternative to platinum as an autocatalyst remains almost 4% cheaper over the year.
