All Eyes on South Africa

If I were to handicap the possibility of a labor strike amongst the labor unions working in South African gold mines next week, I'd place the odds at greater than 50%.  The wage concessions between management and the workers are too far apart to come to a quick resolution, after three months of negotiations.

Last year's negotiations were acrimonious and later turned deadly as police clashed with striking unions.  Prices for platinum and gold increased by double digits as the strikes stretched out.

While South Africa is no longer the dominant gold producer as it was several decades ago, they still are the world's fourth largest producer.  High-grade ore finds have dissipated, so mines have gone deeper--and working conditions have become more dangerous, partially fueling higher wage demands.

With rising global demand and decreased supply, the current supply shortage will become more acute if production from South Africa is removed.  Couple that with typical increased seasonal demand from religious holidays and wedding seasons, and we could see rising prices of precious metals amplified by supply disruptions.

http://www.sprottgroup.com/thoughts/articles/all-eyes-on-south-africa/