Gold jumped on the London open overnight, hitting a ten-week high. The yellow metal is trading around $1,320 in early New York trading. Silver jumped to $21.18 in early European trading, and maintaining strength to either side of $21 in New York.
Platinum jumped at the COMEX open, and is flirting with the $1,470 level after easing only slightly. Palladium is up slightly, at $835.
The big news on the production front is an agreement finally being signed in South Africa between the AMCU mineworkers’ union and the three big platinum mining companies. However, there are already hints that the deal will not last. AMCU president told a mass rally of union workers that the mining companies had agreed to no layoffs for the three years of the deal. This statement caught the companies by surprise, as no such thing was promised.
Due to the deterioration of the older mines after five months of inactivity, some of them may never be reopened. The cost of repairing them and bringing them back on line, especially with the much higher labor costs, means that they cannot earn their own keep. This will necessarily bring on job cuts, which may spark more violence.
Even though workers are supposed to return to the mines this week, they will all have to be retrained and safety courses taken again. Analysts predict that it will take two to three months for the mines to reach full production.
This will only exacerbate a world record platinum shortage. CPM Group estimates a 814,000 ounce shortage, just in industrial uses. This figure does not include retail investment demand or platinum ETFs. Palladium for industrial use is expected to reach a deficit of 367,000 ounces.
In other labor news, AMCU was thwarted last week in its bid to spread the mining strike to five of the largest gold mines in South Africa. The national Labor Court rejected AMCU’s claims that provisions that the previous wage agreement was concluded under were unconstitutional. Had they prevailed at court, it would have given unions the ability to call strikes in the middle of contracts in an effort to wring more concessions from the companies.
Gold may have reached its summer trough early this year, thanks to Janet Yellen and Sunni terrorists. In her latest press conference, Yellen called the uptick in inflation, food costs, and oil, simply “noise” that the Fed was ignoring. When taken on top of the Islamic State of Iraq and Syria (ISIS)’s continuing conquest of a large portion of northern and western Iraq, the dollar and Treasuries don’t look every appealing.
Citi Research says that it expects gold to remain over $,1300/oz for the rest of the year, while MKS predicts a range of $1,250 – $1,350, trending towards the upper side of the scale.
The big mover, however, has been silver. The gold-silver ratio made a huge jump overnight, from 67:1 to 62.8:1. Expect this to give support to gold, as it tries to catch up.