Palladium hits 3-1/2 year high as S.Africa wage talks break down

June 10, 2014

London (June 10)   Palladium jumped to its highest level in nearly 3-1/2 years on Tuesday, while platinum also gained, after talks to resolve a five-month strike in top producer South Africa broke down.

Wage talks between South Africa's main mine workers' union and major platinum producers were deadlocked on Monday, prompting the mining minister to abandon his mediation role and dashing hopes for an end to a strike that is pushing the economy towards recession.

Palladium, of which South Africa is the second-biggest producer, hit its highest since February 2011 at $847.50 an ounce, and was up 0.8 percent at $844.80 as of 1207 GMT.

"For palladium, it is a combination of factors definitely including the strike, but also the possibility of a shortfall in supply from number one producer Russia and strong demand from the physical side on the back of higher car sales and also investor demand," Commerzbank analyst Eugen Weinberg said.

Platinum was up 1.9 percent to $1,471.25 an ounce after hitting its highest since May 27 at $1,471.50.

"It looks like the strikes are going to continue for some time and that's why platinum is higher," ABN Amro analyst Georgette Boele said.

"But the big risk is however on the downside should an agreement be reached, as the attempts higher over the past few months have not been as successful."

The five-month strike has halted mines that normally account for about 40 percent of global platinum output.

Analysts had expected prices to react more dramatically to the lack of supply, but platinum has risen just seven percent over the past five months as stocks on hand have helped to cover lost output.


Gold edged up 0.3 percent to $1,255.04 an ounce, gaining some traction from mixed European equities, while a firmer dollar capped gains.

European stocks paused after gaining almost 10 percent in the last few months.

The dollar rose 0.3 percent against a basket of currencies, continuing to benefit from rising U.S. Treasury yields, whose returns are closely watched by the gold market, given the metal pays no interest.

"The big action for gold was on Thursday, when gold managed a strong rebound after being under pressure but since then it has been rangebound around $1,250, indicating there is no conviction from investors," Boele said.

"This $1,250 level is not there to stay and gold will get renewed pressure from stronger U.S. data."

Gold rose around 1 percent last Thursday after the European Central Bank cut interest rates to record lows as dealers who had bet against the move rushed to cover positions, analysts said.

Monthly data from asset manager BlackRock on Monday showed about $297 million was withdrawn from gold exchange-traded products in May as some of the heat came out of the Ukraine crisis, BlackRock said.

Physical demand in Asia was subdued as prices stabilised and was not strong enough to push prices higher.

Silver rose 0.2 percent to $19.05 an ounce.

Source: Reuters

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