-- Posted Thursday, 31 May 2007 | Digg This Article
GDP figures were revised downward for the first quarter of 2007 from 1.3% growth to .625% growth. This was not wholly unexpected in the market, but the downward revision is even larger than had been estimated by numerous economists. This set of GDP data was the weakest since 2002. Growth is expected to show some increased readings moving into the 2nd half of 2007, but should we get another set of readings on the economic growth at this level, the Fed will come under a great deal of pressure to cut rates pronto.
**********************************************************************
The potential for a strike hitting South African mining companies is becoming more likely after the recent wage negotiations ended in a stalemate between union reps and mining executives.
"If companies do not demonstrate that they take the contribution of workers to the industry's success seriously, workers will have no choice but to demonstrate their displeasure through protest action."
Pieterse also cautioned that time for negotiations was running out, since the current wage agreement would expire on June 30.
"We urgently want to see more seriousness on the part of employers if massive protest action in July is to be averted," he said. - I-Net Bridge article, May 31st
This strike has the potential to affect the entire precious metals sector, but will have the most impact in the platinum markets which on a supply level is infinitesimally smaller than the gold market and has the bulk of production coming out of South Africa. Regardless of which metal a strike helps the most, South Africa is still the largest gold producer in the world. Having any shut in of mines for a few weeks or possibly even a month would cause a serious supply gap in the market that even ramped up central bank sales would have trouble filling.
**********************************************************************
Precious metals have peeled of the collective radar of the average investor in the last few weeks as there has been some continued consolidation in the gold and silver markets. Platinum and palladium have become speculative driven plays due to a swelling of activity in European bourses and base metals are again the rage in the commodity sector with mega-mergers on the horizon in the alumina space and some potential iron ore deals being tussled about.
Since we're in a precious metals market that always seems to attract investors when prices are rising rather than buying on pullbacks, keep a few things in mind while the price is kicking around these levels. Central bank sales have ramped up considerably in the last few months, but they are still going to be well short of the 500 tonne quota by the end of the year. Mine supply is flat to slumping according to nearly everyone in the industry; analysts, mining execs, government officials, etc. are all reporting lower than expected production.
Now we're getting ready to enter the season that is typically the lull in investment demand for precious metals on an annual basis. It's our opinion that this summer could potentially be quite a different seasonal experience than those of years past. We have the labor strikes, more than likely a slow down of the increased central bank sales of late, and the market is out of favor at the same time the US economy is showing some serious fatigue and the rest of the globe is continuing to grow.
Increased central bank supply has kept prices bottled up at a time when the WGC has said total demand has grown in the market. Now those sales should be slowing at the same time the largest producing country might be headed offline. It's going to be a much different seasonal period than those of years past.
**********************************************************************
Blanchard and Company, Inc. is the largest and most respected retailer of American rare coins and precious metals in the United States, serving more than 450,000 people with expert consultation and assistance in the acquisition of American numismatic rarities and gold, silver and platinum bullion. The Blanchard Economic Research Unit is a key source of precious metals market analysis and continues to be an important resource for financial and consumer media throughout the United States. Blanchard and its predecessor companies have called the New Orleans area home for more than 30 years. For more information about the company, visit www.BlanchardGold.com
or call the company toll free at 1-800-880-4653.
