-- Posted Friday, 22 June 2007 | Digg This Article

Toeing the line...

Realizing that they were both starting negotiations at opposite ends of the spectrum, the Chamber of Mines (gold mining companies) and three South African labor unions, backed away from the table yesterday, reset the clock and will restart negotiations on the 2nd of July. 

What hasn't restarted are the negotiations between the platinum producers and mining unions in South Africa.  Complaints have been lodged in that industry and the unions are moving closer to strikes versus individual companies in the coming week.  So while the gold sector has gotten a brief reprieve in the next week, the platinum industry in South Africa has not.  A strike in the PGM market could have a major implications on supply within the market as 75-80% of platinum supply is mined in South Africa.

PGM markets should begin to see a lot more trading activity and price volatility in the next two weeks as that markets supply demand issues come front and center over other precious metals news.

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Below are a few notes cherry picked from a Mineweb.com article which is quoting a new CIBC report.  Some of these points sound pretty familiar on what is going to drive the gold price, lower production, central banks running out of gold and investor demand….

These drivers include:

1. Perceptions of interest rate changes, especially since inflation is playing a bigger role. "Historically gold has done well in time of inflation and we would expect it to remain a story of wealth in such an environment again."
2. U.S. dollar movements. "We continue to think that the U.S. dollar is vulnerable to further weakness, which should provide a driver to gold prices."
3. Investment demand. The largest incremental buyer of gold bullion during the bullion market has been investors.
4. Potential Central Bank activity. "...Central bank selling has the potential to slow down as seen last year when the Central Bank Gold Agreement (CBGA) undersold its allotment by about 100 tonnes. Thus far, sales have been mixed (early slow, lately faster) but we expect that the 500-tonne cap is not likely to be met again."
5. Supply shrinkage. "Despite good increase in exploration expenditures in the past few years, there has been no deluge of new discoveries. The only new discovery of any size in the last two years has been Aurelian's (TSX: ARU) Fruta del Norte deposit, despite expenditures totaling over $5 billion. With no influx of new supply, the maturity of older deposits is beginning to show with many companies have declining production especially when accounting for the consolidation effects."
6. Geopolitical uncertainty. "While perhaps not a driver for gold prices, we expect that the uncertainty associated with political events will provide support for bullion for a long time."

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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.

-- Posted Friday, 22 June 2007 | Digg This Article

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