South African mines hit by new strikes

The dramatic rises in gold and silver prices that followed the Federal Reserve’s “QE3” announcement earlier this month has stalled over the last few days. Gold is encountering selling pressure on trips above the $1,770/oz mark, while silver was hit hard yesterday afternoon along with stocks and commodities, as European problems again start to hog financial headlines.

Unnamed IMF sources are said to want more stringent terms for future loans to Greece, while Spanish bond yields are on the rise again; the yield on Madrid’s two-year note rose 25 basis points yesterday to 3.41%. Regarding the Spanish situation, readers may be interested in the video below, which features James Turk interviewing Felix Moreno de la Cova, a contributor to this website. Felix is a trader and student of economics, and is based in Madrid, which gives him an intimate look at the issues facing the country. Alas, Felix is no optimist – would you really expect to find any on this site? – as the video title hints at.

News broke this morning that AngloGold Ashanti – the world’s third largest gold producer by sales – has been forced to suspend mining operations in South Africa, as most of its 35,000 employees in the country have started striking. As the FT reports, South Africa accounted for about a third of AngloGold’s total production in the first half of this year. Fellow South African mining giant Gold Fields is also grappling with strikes, as is the world’s largest platinum producer, Anglo American Platinum.

Is this bullish for precious metals, on account of the fact that less newly mined metal will be hitting the markets, thus driving up the price? Not really. Just 2,818 tonnes of gold was mined all over the world last year, which is around 1.8% of the existing aboveground stock. This is a drop in the ocean compared with the value of physical and futures trading that goes on in the gold market each day.

In this big scheme of things, these strikes are of limited significance to buy-and-hold bullion holders (though mining investors of course are another story).