Gold Continues Rally, PGMs Fall on Strike Rumors: Morning Market Update June 12

June 12th, 2014 by

Gold and silver are still rallying on short covering and alarming events in Iraq, with gold hitting two-week highs for the third day in a row.

The PGMs sold off this morning as the striking platinum mineworkers union in South Africa take the mining companies’ latest salary offer directly to the workers.

The dollar fell yesterday as expectations of a Fed rate hike before next summer evaporated. Gold stuck to a tight range, hanging on to Tuesday’s gains, while silver did the same, trading unchanged. The PGMs saw minute gains, ending essentially flat.

mine shaftAMCU, the South African mineworkers’ union behind the five-month strike that has idled 40% of world platinum production, has called a mass meeting today to present the latest offer from the mining companies direct to the workers. If the workers, whose families are facing starvation after 4 months with no pay, approve the measure, the union leadership will save face.

The dollar is in negative territory for the second day, after stabilizing overnight. An uptick in first-time jobless claims and worse than expected retail sales in the U.S. caused the latest weakness in the greenback. One section of retail sales that saw an increase was building materials and gardening supplies. The idea of starting your own “Victory Garden” to fight rising food prices seems to be catching on.


Wall St. opened lower, and stock indices across the world are either flat or down. Markets had not yet digested what the ECB’s new stimulus measures will mean, and the loan crisis in China has escalated, as more copper and iron ore shipments that were used as loan collateral have disappeared.

Add to this the possible destruction of Iraq as a single nation that seems to be playing out this week, and stocks are very nervous.

oilBrent crude futures hit a three-month high this morning over $112 a barrel, and WTI futures were over $106 on lower U.S. petroleum supplies and the alarming conquests of Al Qaeda splinter group Islamic State of Iraq and the Levant (ISIL).  ISIL’s stated goal is to erase the European-drawn national borders in the Middle East, and found a new Caliphate based on medieval Islamic law. ISIL may be the largest and most powerful branch of Al Qaeda, eclipsing Osama bin Ladin’s successor.

The terrorist army has seized large swaths of territory in eastern Syria, which it has joined to its area of control in western Iraq. Iraq’s second-largest city, Mosul, is now in terrorist hands. ISIL captured 80 Turkish citizens and security guards when it seized the Turkish embassy in Modul, and is holding them hostage. The Turkish government has called an emergency meeting of NATO, and asked the UN Security Council to convene in emergency session.

syria-iraqISIL forces today paraded HUMMVs and Blackhawk helicopters that it has captured from the Iraqi Army, and is using them on their offensive towards Baghdad. At the same time, the Iraqi Army has fled the northern oil city of Kirkuk, leaving it in the hands of the Iraqi Kurdish peshmerga fighters, who vow to defend it from ISIL.

The situation could erupt into a general MidEast war, if Iran comes to the aid of the Iraqi Shiite government, and Turkey invades northern Syria and Iraq in retaliation for the capture of their embassy. Turkey also has extreme concerns over the Iraqi Kurds using the Kirkuk oil fields to finance their independence, as that would give a base of operations to Turkish Kurdish rebels.

Watch for safe haven demand for gold and silver and more jumps in oil prices, as the threat grows of a disruption in Iraqi oil exports. If a labor agreement is reached in South Africa, there will probably be a knee-jerk selling response from speculators, but the reality of massive shortages of both platinum and palladium should re-asset itself afterward.

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News