South African Strikes Continue; Citigroup Estimates Probability of QE3 at 99%

Gold and silver are trading relatively flat today while platinum and palladium are up following news of further unrest surrounding South African miners and leading platinum producer Lonmin plc. Reports were released today that 10,000 striking platinum miners – many of whom were armed with sticks and machetes – marched on several Lonmin mine shafts threatening violence against strike breakers who are continuing to work. The recent strikes have inspired laborers in South African gold mines to rebel against their own employers. The result has been a stoppage of production at two Gold Fields (the world’s fourth largest gold producer) mines in the last several days. “We haven’t been given any demands but the pattern is the same as KDC East. It is intimidation. The strikers went around from hostel to hostel yesterday to prevent the others going to work,” Gold Fields spokesman Sven Lunsche said.

Despite the conflict, the Gold price has yet to be seriously impacted by concern over a significant stoppage in production. The main focus for investors is the looming concern over the Federal Reserve’s announcement of a third round of bond-buying known as quantitative easing (QE3). An analysis of current market factors and recent news surrounding the state of the U.S. economy have prompted Citigroup Inc. to estimate the chances of QE3 at 99% as many experts await more definitive language from the Fed regarding the steps it will take to aid the struggling economy. “Nervousness and continued agony over in Europe, the fiscal cliff, election uncertainty means there are a lot of headwinds,” said Mark MacQueen, partner and money manager at Austin, Texas-based Sage Advisory Services Ltd., which oversees $10 billion. “Everything is lining up to be more difficult. The Fed will give us language that reassures the market they intend on doing more.”

At 1PM EDT the APMEX precious metals prices were:

  • Gold price – $1,731.10 – down $8.40
  • Silver price – $33.57 – down 12 cents
  • Platinum price – $1,605.00 – up $7.70
  • Palladium price – $672.20 – up $17.40
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Gold prices holding steady

With all the negative global economic news being reported, Gold is holding steady. While the news from Europe and its global effects seem to dominate the headlines, Gold is quietly holding its place. The larger question is not the situation in Europe, but how that might affect the United States economy. “(Federal Reserve Chairman Ben) Bernanke, in comments made to the Congress committee last week, seemed to be intimating that QE was off the table, but I wonder if, (as) Europe continues to drag, the likelihood of QE continues to grow. That in itself should be supportive for Gold,” Citigroup analyst David Wilson said.

Talk in Europe has focused on Greece and the major economic turmoil unfolding. There has been talk of an exit from the European Union by the Greeks. However, Vitor Constancio, vice president of the European Central Banks, says such a move would have a dire outcome. “I cannot imagine a country to leave the euro and survive. For that country (Greece) in particular, it would be catastrophic.”

Reports released today showed retail sales fell for the second straight month in the United States. Taking that information and adding it to other recent reports such as employment and manufacturing data, they all show that American recovery efforts are slowing. As it slows, the talk of more monetary easing picks up. “We still believe the Fed would prefer to wait a bit longer on QE3 to see how the domestic and global situations play out, but the weak data certainly strengthen the argument for action,” said Michelle Girard, senior economist at RBS in Stamford, Conn.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,616.40, Up $2.60.
  • Silver, $28.99, Down $0.06.
  • Platinum, $1,468.10, Up $11.70.
  • Palladium, $623.50, Down $0.80.
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