Platinum firms on strike action, gold holds near $1,290

May 20, 2014

London (May 20)  Platinum prices edged higher on Tuesday as South Africa’s longest and costliest miners’ strike ground on, while gold steadied as gains in the dollar held it near key chart support.

Platinum extended gains after refiner Johnson Matthey said it believed the deficit in the platinum market will expand to 1.218-million ounces this year, its largest shortfall in a data series going back to 1975.

Spot platinum was up 0.4% at $1,469.74 an ounce at 2.39pm GMT. It hit a high of $1,476.30, not far from last week’s peak of $1,483.50, its strongest since early March.

Despite recent strength, platinum is struggling to break higher on the back of the miners’ strike in top platinum producer South Africa, source of around three-quarters of world supply, as the availability of above-ground stocks curbs gains.

"While palladium is in an uptrend, platinum is still stuck in a sideways trading pattern. $1,490 seems to be too much of a challenge at this stage," Saxo Bank’s head of commodities research Ole Hansen said.

The four-month action against Anglo American Platinum, Impala Platinum and Lonmin, has disrupted 40% of platinum output and could cost 1-million ounces of production this year.

The strikes turned violent this month, with four miners killed as more employees tried to report for work, ignoring calls by the union to continue protesting.

Meanwhile gold remained near $1,290 an ounce as the dollar index rose 0.1% and an industry report showed gold demand in major consumers China and India fell in the first quarter.

Spot gold edged up 0.2% to $1,293.60 an ounce, while US gold futures for June delivery were down 40 cents at $1,293.40 per ounce.

Gold off the radar

The World Gold Council said on Tuesday consumer gold demand in the world’s biggest buyer China fell 18% to 263.2 tonnes, with Chinese demand for gold coins and bars down 55% in the first quarter, offset only partially by a 10% rise in jewellery offtake.

"The WGC report would be consistent with our Standard Bank Gold Physical Flow Index, which indicates that Asia physical demand is trailing 2013 levels," Standard Bank said in a note.

"To us, Asia demand appears more consistent with levels seen in 2012, rather than 2013. We believe gold must move lower before physical demand will pick up substantially again. Our tactical view remains unchanged: we expect rallies to fade." Indian consumer demand was down by just over a quarter to 190.3 tonnes, although a drop in sales from bullion-backed investment funds kept overall demand steady.

Gold trading was quiet overnight in Asia on Tuesday, Swiss bullion house MKS said in a note.

"In recent days, despite the premium over spot on the Shanghai Gold Exchange hovering around $2, as well as the Japanese adding to their net long positions on Tocom ... gold has been unable to gain any upside traction," it said.

In other precious metals, spot silver was down 0.5% at $19.32 an ounce, while spot palladium was up 1.4% at $823.45 an ounce.

Palladium holdings of exchange-traded funds hit record highs after an 8,000-ounce inflow into Standard Bank’s Africa Palladium fund on Monday.

Silver Phoenix Twitter                 Silver Phoenix on Facebook