Precious metals
The latest media reports in South Africa indicate some positive momentum towards an
end to the strike in the platinum sector.
Our political analyst has said that “although details around the wage offer remain vague,
reports suggest a lift in the basic pay for the lowest-paid mine workers by ZAR800 per
month for the next five years (the previous offer included a ZAR500 per month
increase). However, the offer remains some way off AMCU’s persistent demand for an
immediate lift of lowest-paid workers to ZAR12,500. The current offer would, it has
been reported, lift the lowest basic wage at Amplats to ZAR9,000 per month and at
Implats to R9,713 per month by 2017. It is likely, therefore, that the previously
optional “living out allowance” (itself a source of contention) could be loaded into
workers’ basic pay to bring the offer nearer to AMCU’s demands. At Implats, the living
out allowance amounts to ZAR1, 850 per month; at Lonmin ZAR1, 950 per month; and
at Amplats ZAR1, 737 per month. That said, AMCU indicated last night that it is not yet
ready to take the offer to workers and that another set of meetings today needs to take
place”.
Overall, we would expect some of the speculative length in the platinum market (and, to
a lesser extent, in the palladium market) to liquidate holdings should the strike end.
However, our long-held tactical view stands: we see value below $1,400 in platinum,
while upside above $1,500 is not yet sustainable. For the gold/platinum ratio, we
believe that a spread above $200 becomes unsustainable, based on our view that
jewellery demand for platinum is likely to fall away above $1,500 and with a spread to
gold of over $200. Nevertheless, we would expect renewed interest in jewellery demand
should the price drop some way below $1,400.
Gold is still struggling as investment demand remains absent, in our view, largely due to
rising equity prices, especially in the US. But demand from China also seems still muted,
as is evident from the SGE premium that has not moved much in recent days, despite
the price decline. It is worth noting that in South East Asia there has been a marginal
improvement in demand since yesterday. It’s too soon to judge whether this trend will
continue. For now, we expect gold rallies to fade.
Gold support is at $1,239 and $1,235. Resistance is at $1,249 and $1,255

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