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'Mugabenomics' From Zimbabwe To The UK - "Gold Is Good"

-- Posted Wednesday, 3 October 2012 | | Disqus

Today’s AM fix was USD 1,777.25, EUR 1,374.73, and GBP 1,102.38 per ounce.
Yesterday’s AM fix was USD
1,778.50, EUR 1,377.19 and GBP 1,100.56 per ounce.

Determined selling saw gold inch down $1.80 or 0.10% in New York yesterday which saw gold close at $1,775.10. Silver climbed to $35.04 then it pulled back on sharp selling and finished with a loss of 0.37%.

Currency Ranked Returns – GBP in Fiat and Precious Metals In Last 5 Years

Gold continues to hover near its 11 month high in dollar terms and near new records and the €1,400 level in euro terms.

The lack of confidence over Spain’s finances has kept investors alert as they await a US jobless report on Friday to ascertain just how poorly the US economy is. Recent data suggests that the US economy is in a recession and may be on the verge of a Depression.


 Recent disappointing economic data from Australia and China increased speculation of more ‘quantitative easing’ from central banks after Australia’s surprise rate cut yesterday. The Aussie dollar has fallen by nearly 3% already this week after the rate cut.


Although Spain’s Prime Minister Mariano Rajoy denied a Reuters report of an imminent request for a bailout, Spain has taken centre stage in the eurozone debt crisis while Greece, Portugal, Italy and France wait in the wings.

Bill Gross has compared the US government's reliance on debt financing to a "crystal meth" addict, in the latest in a series of dire warnings from one of the most influential investors in the bond market.

"The US, in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth", said Gross, who manages the $273bn Total Return bond fund for PIMCO.

Gross places the US in a "ring of fire" that includes countries with precarious finances such as Greece, Spain and Japan. He said that failing to address the problem would ultimately lead to government printing of money and inflation. "Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the "Ring of Fire"."

Industrial unrest in South Africa has deepened and is spreading from the mining sector to other sectors of the economy. Gold Fields, South Africa’s second-biggest producer of the metal, said striking workers threw fire bombs at cars today (see News).

The South African truckers strike has halted the delivery of goods across the country, as more than 20,000 truckers dig in on their demands for higher wages.

ATMs ran out of cash, fuel stations were running dry and hospitals saw vital coal supplies diminish as the nation felt the pinch from the strike that entered its second week. Petrol stations have begun to dry up in several areas in Gauteng province, the country's economic centre.

The strike in the gold mining sector continues to put a halt to 39% of the nation’s sizeable gold output.  This is supporting gold.

 XAU/GBP Daily 2 Years – (Bloomberg)

The well followed and influential UK blog 'Guido Fawkes' has an interesting blog today again warning of the significant risk that rampant money creation will lead to rampant inflation

It also points out the hypocrisy of the current UK Conservative / Liberal Democrat government.

In a post entitled 'Mugabenomics: Inflation in UK Higher than in Zimbabwe,' Guido Fawkes points out how the Liberal Democrats Vince Cable once warned that Quantitative Easing (QE) was “Mugabenomics.”

This was prior to coming to power and a swift u-turn which would make even the most slippery politician proud.


Remember when Vince Cable warned that Quantitative Easing (QE) was “Mugabenomics”? Vince flip-flopped on that even before he joined the coalition.


Guido Fawkes then reminds its readers about the time when George Osborne said “Printing money is the last resort of desperate governments when all other policies have failed.”

Alas as the blog rightly warns, "In government Osborne has overseen the printing of more money than any other Chancellor in British history. A quarter of the national debt – all this government’s overspending – has been bought by the Bank of England via QE."

“So it is not a shock that inflation in Zimbabwe (3.63%) is now lower than inflation in the UK (3.66%, August 2011-July 2012).”


Those who have been warning about this monetary madness for some years are gradually being proved right.

Bank of England and UK government policies have already seen the British pound fall sharply in the last 5 years. The pound has fallen sharply versus stronger fiat currencies such as the Japanese yen and Swiss franc and by much more against gold and silver.

The pound has fallen by 208% against gold and by 229% against silver in the last five years (see table above)and the continuation of similar monetary policies will likely see similar falls in the coming five years.


Like the world’s largest bond fund manager, Bill Gross, Guido Fawkes correctly and pithily comes to the conclusion that "gold is good."

(Bloomberg) -- Gold Fields Workers at KDC Throw Fire Bombs as Strikes Persist

Gold Fields Ltd., South Africa’s second-biggest producer of the metal, said striking workers at the KDC West mine threw fire bombs at cars after about 1,000 assembled at the site. There were no “hospitalized injuries.”


The workers gathered late yesterday after being instructed to vacate hostels that had become “lawless and violent,” Sven Lunsche, a spokesman for Johannesburg-based Gold Fields, said today by mobile phone. The company applied for a court order to evict them after they failed to leave their accommodation.


Unofficial strikes have spread across South Africa’s mining industry since a six-week stoppage at Lonmin Plc resulted in pay increases of as much as 22 percent. Walkouts have also suspended sites owned by AngloGold Ashanti Ltd., South Africa’s largest gold miner, and Anglo American Platinum Ltd., where its Union operation is the latest to be disrupted, it said late yesterday.


Gold Fields workers have been on strike at KDC West since Sept. 9, cutting output by about 1,400 ounces a day, and have also downed tools at the Beatrix site. A judicial inquiry into the deaths of 44 people at Lonmin’s Marikana mine started this week.

(Bloomberg) – South Africa Platinum Mines May Cut 8,000 Jobs
Platinum companies in South Africa, which produces three-quarters of global supply, may cut more than 8,000 jobs as striking workers demand wage gains from cash- strapped employers, SBG Securities Ltd. said.

Worker pay increases will inflate costs, weighing on “already unsustainable industry margins,” analysts Justin Froneman and Walter de Wet said today in a note. Annual earnings may fall by about 65 percent, while employment may drop to about 176,650 next year from 184,890 last year, they said.

Strikes have spread through South Africa’s mining industry since workers at Impala Platinum Holdings Ltd. downed tools at the start of the year. Impala has since raised pay twice, while a stoppage and violent protests at Lonmin Plc resulted in wage increases of as much as 22 percent. Strikes have also disrupted Anglo American Platinum Ltd., the largest producer of the metal.

Higher wages mean about two-thirds of the platinum industry could be cash-negative next year when taking into account planned capital spending, Deutsche Bank AG said today in a note. While strikes drove up platinum prices by 21 percent in the past two months, the demand outlook has weakened, the bank said.

A stoppage that began at Anglo American Platinum’s Rustenburg mines in North West Province has spread to the company’s Union mine in Limpopo Province, it said today in a statement. Workers refused to go underground and handed a memorandum to management, it said, without disclosing workers’ demands.

Platinum Shortfall

There may be a 355,000-ounce platinum deficit this year following South Africa’s “labor spring,” greater than the 112,000-ounce shortfall estimated previously, the SBG analysts said. South Africa may produce 4.1 million ounces, its lowest volume of primary platinum this millennium, they said.

Prior to the wave of strikes, platinum companies were already contending with overcapacity, rising costs and falling prices. Aquarius Platinum Ltd., the fourth-largest producer, shut most of its mines in South Africa before the latest labor action. Anglo American Plc said in February it would review its Anglo American Platinum unit as returns fell short of forecasts.

The Congress of South African Trade Unions and the National Union of Mineworkers will support wage demands of as much as 21,500 rand ($2,572) a month, Cosatu Secretary-General Zwelinzima Vavi said today. That’s almost double the amount in 2010, when annual wages for South Africa’s 498,140 mine workers averaged 149,006 rand, the Chamber of Mines’ website shows.

Gold Strikes

The strikes that began in the platinum industry have also spread to gold mines, with AngloGold Ashanti Ltd. and Gold Fields Ltd. among companies reporting walkouts.


“There is no doubt in the world that the agreements in platinum will result in job losses” and posts may also be lost at AngloGold, Mark Cutifani, chief executive officer of the Johannesburg-based company, said in an interview on Talk Radio 702.


Strikes that have “ravaged” South African mining will probably increase across the precious-metals industry and may persist “well into 2013,” SBG said.

The six-member FTSE/JSE Africa Platinum Mining Index has fallen 22 percent this year. That compares with a 1.5 percent decline in the FTSE/JSE Africa Mining Index.

Cross Currency Table – (Bloomberg)

Johannesburg (AP) -- South Africa Truckers Stage Protest in Johannesburg

 Thousands of striking truck drivers protested Tuesday amid heavy police presence in central Johannesburg as labor unrest continued across South Africa, leading to fears of renewed violence.

The truckers marched to the nearby area of Braamfontein to submit a petition to the transport bargaining council for a 12 percent pay raise, said the South African Transport and Allied Workers' Union, which organized protests around South Africa. Vincent Masoga, a spokesman for the union, said the group wanted a "massive attendance" of 15,000 people in Johannesburg who were expected to remain peaceful throughout the march. The protesters, some wielding sticks or placards and others dancing or singing freedom chants, gathered in Johannesburg's Beyers Naude Square for the march.

Labor unrest is also affecting other industries in South Africa, where strikes have spread to several gold, platinum and chrome mines, damaging investor confidence in a country that is among the world's top producers of valuable minerals. The Limpopo branch of the South African Municipal Workers Union said Tuesday it was organizing at least 5,000 workers to "effectively bringing service delivery in the province to a halt." The group said it was calling mass action to compel the South African Local Government Association to put in place "a proper wage structure in the municipal sector..."

Miners in Orkney, in the North West province, plan to stage a rally Wednesday over poor wages and living conditions, union officials said.

Strikes began in August at Lonmin's Marikana mines, where police shot dead 34 striking workers on Aug. 16, a level of state violence not seen since the end of apartheid in 1994. A retired judge is currently leading an official inquest into the Marikana incident and related violence that killed at least 44 people. The commission of inquiry will determine the roles played by the police, Lonmin and two mining unions, and whether any of those under investigation could have done something to prevent the violence.

In September the Marikana strikers returned to work after accepting a pay increase of up to 22 percent through negotiations that also involved church leaders as mediators. But two of South Africa's most powerful unions said in a joint statement Tuesday that the Marikana settlement set a bad precedent for labor relations in South Africa.

"Lonmin should have known that getting wage negotiations to be facilitated by the churches and allowing everybody, no matter their legal status, to play a role in the negotiations will create precedents that they will not be willing to repeat anywhere else," the Congress of South African Trade Unions and the National Union of Mineworkers said in a statement.

The unions said that wage demands can still be resolved through collective bargaining rather than "contemplating taking short cuts such as mass dismissals of workers..."

Even as South Africa grapples with the Marikana incident, there appears to be no end in sight to the ongoing labor unrest. A truck traveling on a highway in Cape Town was pelted with stones Tuesday, causing it to overturn, and two other trucks were set on fire, according to the South African Press Agency. The National Union of Mineworkers said Monday that one of its officials had been taken into intensive care after a petrol- bomb attack on his house. The union said the victim is its top official at Anglo American Platinum's Khomanani branch and that the attack was carried out by people who are deliberately intimidating union members.

Workers have been on strike for weeks at Anglo American Platinum, the world's largest platinum producer. Similar strikes are ongoing at Gold Fields, Samancor Chrome Western Mine and Anglo Gold Ashanti, a top gold producer whose operations have been brought to a standstill.


For breaking news and commentary on financial markets and gold, follow us on Twitter.

Gold eases, but still near 2012 high on Spain caution - Reuters

Bill Gross says only gold and real assets will thrive in fiscal 'ring of fire' – Market Watch

Gold Fields evicts workers as mining strike spreads – Mail & Guardian

China's biggest jewelry retailer expanding to feed voracious gold demand – China Daily

Signs Of The Gold Standard Emerging In China? - Forbes

Arensberg: Gold at Critical Price Point – Got Gold Report

From Currency Debasement To Social Collapse: 4 Case Studies – Zero Hedge

Do Western Central Banks Have Any Gold Left? – Zero Hedge

Video: South African Strikes Spread to Gold Mining - Bloomberg

Video: What Do Oil and Gold Need to Hit New Records? - Bloomberg

Look Out Silver, Here Comes Solar Demand – Casey Research

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