Wholesale-market prices to buy gold eased $5 in London on Thursday after an overnight rally to $1760 per ounce.
The Euro currency also eased lower after rallying to $1.29 – some 2¢ below the 5-month high hit a fortnight ago – as Spain was set to unveil its latest government budget cuts and Italy’s economy minister said Rome has no plans to request bail-out help.
Asian and European stock markets rose and major-economy “safe haven” bonds ticked lower.
US crude oil rallied back above $90 per barrel. Silver prices held in a tight range above$34.00 per ounce.
“Wednesday trading was dominated by a strong US Dollar,” says a note from German universal bank Commerzbank. “It pushed [all] precious metals lower.”
Although prices to buy gold “recovered almost all of [their] losses on Wednesday,” says the latest technical analysis from London market-maker Scotia Mocatta’s New York team, “gold broke through the bottom of the recent range on an intraday basis.”
“This is near term bearish, but…we could retreat to $1712 without damaging the longer term uptrend. We believe that gold will try to test this level.”
“Gold [on Wednesday] finally had a decent flushout,” says the Asian office of Swiss refiner and finance group MKS.
Yesterday’s “rebound off [2-week] lows suggests there are still players waiting to buy gold on the dips.”
“This was a healthy correction to clean out weak positioning, and long term probably just what the market needed.”
On the supply side today, Bloomberg News reports that 39% of gold mining output in South Africa – the world’s former #1 producer – has been closed after fresh wildcat strikes hit gold majors AngloGold and Goldfields.
New wage demands handed to managers at Anglo yesterday ask for 16,000 to 18,500 Rand per month. Rock drill operators currently average some 10,000 Rand according to local press – equivalent to US$1200.
The world’s third largest gold mining firm, Anglo has now suspended at all of its South African operations according to the Independent Online.
Over in platinum – where South Africa remains the world’s #1 producer, and where this year’s “strike season” first broke – the CEO of Anglo American Platinum said Wednesday that Amplats “will not negotiate” with workers on illegal strike at its key Rustenburg operation.
Last week, wildcat strikers won a 22% raise from platinum producer Lonmin, whose Marikana mine saw 34 workers killed by police in rioting this month.
“There’s no question it has caused massive damage to us and incredible damage to South Africa’s mining sector,” says Albert Wocke, associate professor at University of Pretoria’s Gordon Institute of Business Science.
With formal unions, all closely tied to the ruling ANC party, cut out of Lonmin’s negotiations, “The government needs to step up and reassure investors,” says Wocke.
“We have got an unstable, almost unpredictable regulatory regime.”
Political analyst William Gumede, also speaking to the LA Times, warns that “The biggest red flag is that people might actually start losing their trust in democracy as a protective mechanism.”
After the deaths at Marikana , “I think the police will feel constrained,” Gumede adds, “in how they deal with these strikes now.”
Meantime in Europe, the Spanish government was widely expected to announce sharp new cuts to its 2013 budget, ignoring protests earlier this week and striving to avoid tighter demands from international lenders if – or when – Madrid makes a formal request for help.
“Italy is doing, I believe, a very good job in reforming its economy and without the need for any extra help,” said Rome’s economy economy Vittorio Grilli last night, after meeting with Germany’s central bank president Jens Weidmann.
“At this point, it is not within any plan of the Italian government to apply for any programme. We are solving Italian problems within our government mandate.”
Reuters meantime reports that “tensions have risen in recent weeks” between Greece’s three official-sector lenders.
After the European Central Bank last week moved to start buying more weak-Eurozone debt in the bond markets, “The problem is between the IMF and the European Union,” says an anonymous Greek official, blaming the International Monetary Fund for wanting to impose harsher budget cuts on Athens to try and reduce its debt burden more quickly.
Adrian Ash | BullionVault