Daily Nugget: Gold Supply Threatened In South Africa

Yesterday the gold price hit a three-and-a-half month high but has since eased. The fall from the recent high to $1,413 comes as the safe-haven faces off a strong dollar and a pick-up in scrap selling.

Whilst scrap-selling in the West appeared to peak between 2011 and 2012, there appears to be an uptake in it in South-East Asia following gold’s climb above $1,400.

Also in South East Asia premiums on spot gold price in Singapore, Hong Kong and Tokyo are down from a fortnight ago.

US data, released today, is expected to show improvements in the economy prompting concerns that tapering will go ahead. This is further to data that showed jobless benefit claims had fallen this week.

More calls to monetise India’s gold

As we reported yesterday morning, the rupee gold price climbed by its highest amount in the morning. The price is now at an all-time high, a record Rs 33,265 per 10 grams. The record price is thanks to an exceptionally weak rupee rather than the impact of gold controls.

Meanwhile in India the Trade Minister Anand Sharma has said that the Reserve Bank of India should look into monetising its gold reserves. His comments come following those of several economists and even from LBMA representatives.

Syria may not help gold

Threats of missile attacks on Syria appear to have subsided somewhat as the West’s leaders retreat and consult with one another. Many analysts now believe that should there by an attack on Syria, it will be short-lived and they expect the yellow metal to stay between $1,440 and $1,450.

Triland Metals yesterday warned that gold may retreat should the US attack Syria. Given gold is already climbing in the face of a prospective war it is possible that profit taking will occur once shots are fired.

Forgetting about physical demand

After a couple of weeks of gold climbing there remains a bearish sentiment underlying the markets. But few are able to back up their negative outlook with what is really happening to physical gold and silver. We’ve mentioned central banks already this week but the latest to show impressive gold demand is Austria. Here the Mint saw sales of gold coins rise by 79% between January and July, a similar amount to the US Mint who saw sales increase by 82% in the same period.

Supply looks to become a growing issue for gold. In South Africa gold producers are gearing up for 48 hour strikes, due to commence tomorrow. It is estimated that a complete shutdown of the industry in South Africa could cost the country around $35 million a day.