Gold and silver are holding on to yesterday’s gains, as progress in labor talks in the South African platinum fields continues to keep PGMs soft.
Gold is holding an extremely tight range between $1,271 and $1,274, after briefly popping to another three-week high of $1,277 at the London open. Silver is essentially flat this morning after similar large gains, holding between the $19.60 and $19.70 levels.
Platinum saw some new weakness in the COMEX open, dropping to $1,425, but is trending back to unchanged. Palladium is moderately softer, near $810.
Spot gold closed up $12.50, near the top of its trading rang yesterday. Silver mimicked the action, closing up 33 cents. The PGMs were hit hard by news that the AMCU labor union had taken the platinum industry’s wage offer directly to the workers in mass meetings. Both platinum and palladium ended the day down $37.
Reports this morning from South Africa are that the workers have asked AMCU to make a counteroffer to the big three platinum mining companies. The main hang-up seems to be the spreading of wage hikes over five years. The workers want the same total pay raise, but implemented in three years.
U.S. producer prices unexpectedly fell in May, falling 0.2%, against an expected gain of 0.1%. April’s PPI had gained by 0.6%. May PPI year over year came in at 2%, which is where the Fed wants to see overall inflation. Some analysts think that the low monthly number will raise enough deflation fears that the Fed won’t tighten rates any time soon, and may even start thinking of extending their money printing campaign past October.
The British pound soared to 19-month highs yesterday, as the head of the Bank of England dropped a little bombshell. Mark Carney said that the UK’s economy was rebounding strongly, and that the central bank’s first rate hike could come “sooner than the markets expect.” This statement put a bit of a hurt on both the euro and the dollar.
Wall St. opened in positive territory after a bad day yesterday, but immediately headed for the red. Euro stocks hit a one-week low over Sunni/Shiite war in Iraq, with the resulting threat of a major oil supply disruption. In Japan, the Nikkei index closed higher on rumors that a corporate tax cut was about to be announced, In Hong Kong, the Hang Seng index closed up for the fifth week in a row, buoyed by bank stocks. Bank stocks also helped Shanghai close in the green.
Oil prices are holding on to yesterday’s gains, with Brent crude at $113 a barrel this morning, and West Texas Intermediate at $106/bbl.
Sunni Al-Qaeda army Islamic State in Iraq and the Levant (ISIL) conquered two more Iraqi towns in its drive to take Baghdad overnight. ISIL now controls territory stretching from eastern Syria, across northern Iraq to the Iranian border, in its stated quest to erase national boundaries and bring forth a rebirth of the Islamic Caliphate. Many U.S. weapons and vehicles captured from the Iraqi Army have already made their way back to Syria, where ISIL fights for more territory against other rebel groups and the Syrian government.
The government of Iraq has been begging the U.S. to conduct airstrikes against the rebels, as the national army flees before them. The U.S., having withdrawn its small security forces after being kicked out of the country by the Maliki government, refuses to re-commit ground troops, but is pondering sending airstrikes against ISIL. One factor in the decision is ISIL’s possession of modern anti-aircraft weapons, including manpads.
Leader of the Shiite religion in Iraq, Grand Ayatolla al-Sistani, has called jihad against ISIL, proclaiming that those who fall in defending Baghdad, Shiite lands, and holy sites against the rebels will be considered martyrs. Rumors are circulating that Iranian paramilitary troops are already in Iraq, helping defend Baghdad. Anonymous sources claim that the Iranian leadership is willing to cooperate with the US in beating back the ISIL threat.