It's a "Perfect Storm" amidst a gold rush, flooding on the West Coast, and power outages in South Africa
Reported by Kimberly Birkland
Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Hanau, Germany-based Heraeus Metallhandels GmbH said it best when quoted on Bloomberg.com, "It's kind of a perfect storm for precious metals….There are absolutely no platinum reserves, so any supply disruption will have an impact."
When Wolfgang refers to a "perfect storm" there are many contributing factors to this storm. One is the "gold rush" that is going on and being reported in national news as of last night as gold has risen to an all time high. People are emptying out their old jewelry drawers and selling all they can get at pawn shops nation-wide.
South Africa, which accounts for 11 percent of the supply of gold, 78 percent of platinum output, 84 percent of rhodium output, and as palladium is a byproduct of platinum, accounts for the majority of the world's palladium output and is usually mined with platinum.
Right now in South Africa there is a major power shortage, and since most mines are underground, hence no light, there are shutdowns occurring everywhere. AngloPlatinum Ltd. and Impala Platinum Holdings Ltd., the world's biggest producers of platinum, shut most of their mines as the nation's power shortage worsened.
There are also other factors going on here in the US. Oil rose after U.S. lawmakers passed a "package" of laws that tried to avoid recession with recovery in equity values and other White House stimulants such as tax rebates for businesses and households, in hopes of avoiding further debt and recession as the US plummets into a wide-spread, pervasive depression.
Speculation that these tax rebates to skirt recession were outweighed by the impact of the larger-than-expected increase in crude and gasoline inventories was reported by the Energy Department on the 24th. This comes with the statistic that the US is the largest consumer of crude oil in the world, with China increasing its need and lagging right on the tail of the US.
China is also restocking ahead of the Chinese New Year holiday since wire and pipe manufacturers will be on a week-long holiday starting Feb. 6 for the lunar New Year. There is an expectation that the Chinese demand for copper and all other commodities is going to continue to rise, based on its trend and future predictions by analyst John Meyer, at Fairfax I.S. Plc in London.
Not only do we have the power outages and the closing of mines in South Africa driving the price of precious metals through the roof, but we have storms plaguing all of the West Coast of the US. So, it's literally a "perfect storm", and a "gold rush" for the US and the world on a global scale.
Robert Laughlin, a senior broker at MF Global Ltd. in London said that the "primary upside risk will come from further recovery in equity values if White House stimulants take effect along with a serious bout of cold weather hitting the US."
Supply of platinum, the metal used in car catalysts and jewelry has fallen short of demand in seven years since 1999, according to London-based Johnson Matthey Plc, the world's largest distributor of the metal.
To sum it up, "South African power supplies are the reason," Charl Malan, a hedge-fund manager at Van Eck Associates Corp., said in an e-mail. "There's nothing else driving those stocks today."
Anglo Platinum, based in Johannesburg, South Africa, said today that it started "urgent" talks with the country's government on the blackout. The discussions are aimed at ensuring energy supplies to platinum producers remain a priority to prevent disruption to global metal markets, the company said.
Rhodium also rose to a record after power shortages forced the closure of mines in South Africa, well known to be the largest supplier of the metal used in automobile catalysts. Auto catalysts account for about 83 percent of global demand for rhodium. The metal is also used in the chemical, electrical, and glass industries worldwide.
In this "Gold Rush" amid the "perfect storm" some investors are buying the precious metal as a hedge against inflation stoked by higher oil prices, reported via telephone by Ross Norman, director of London-based TheBullionDesk.com and a former bullion trader.