Precious metals
For gold, physical demand keeps slipping as the price moves up. The SGE premium
traded briefly in negative territory yesterday and today as the higher price crimps
demand. In gold, the US government 10-year bond yield is lower yet again this morning.
As pointed out yesterday, we believe that the current rally in the gold price is not
sustainable yet, partly due to our view on US bond yields which we expect to rise further
this year. With higher nominal yields and little inflationary pressures, real interest rates
are also set to rise. Higher real interest rates in our view are likely to see further ETF
liquidation.
The platinum/gold spread has been locked around the $100 level for the past two
weeks, with gold’s move higher dragging the platinum price higher too. Our tactical
view remains unchanged: don’t short platinum below $1,400 and avoid adding longs
above $1,500.
Last week, using Swiss and UK customs data, we inferred that producer inventory in
London and Zurich vaults might be around three months’ worth of production. As a
result, we judge the current strikes, and the possible price action, relative to this time
benchmark. Right now, the platinum strike is in its fifth week. The closer we get to 12
weeks, the stronger the case that the platinum price may push higher if producers need
to go to the market to buy metal to honour existing offtake agreements.
AMCU meets with the CCMA in South Africa again today in an effort to find a solution
to the deadlock in negotiations. In the latest development, our South Africa research
team reports that it has emerged that another platinum sector union will be launched
next Saturday. The Workers Association Union (WAU) has said that they have formed in
order to become the voice of employees dissatisfied with both the NUM and AMCU.
The president, Adam Selaledi, has worked in the mines for 26 years. He said that the
union was not associated with the current platinum strikes, and wanted employees to
return to work. “The main reason we opened this union was to free ourselves from
unions that have been making empty promises. We will meet with the mining houses to
discuss a way forward because, at the end, families are suffering,” Selaledi said.
A former AMCU member said many miners supported WAU, also indicating that:
“As workers we have gathered and come up with solutions to our problems which led to
the birth of WAU. We are currently less than 8,000 and we do not force anyone to join
us. We have support from Impala, Anglo, Lonmin, Pilanesburg, Xstrata and other small
mines.”
Of course, employers can only negotiate with AMCU (given that AMCU is the dominant
union at Anglo, Impala and Lonmin). Therefore, we doubt that this new union will have
an immediate impact on wage negotiations. However, it may put more pressure on
AMCU to come to some agreement should it become clear that although members
would like higher wages, this does not come at any cost (such as job losses).

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