Friday, Aug 17, 2012

--Spot gold up, but gains overshadowed by platinum rally

--Platinum hits highest price in over a month as violence at Lonmin mine escalates

--Spot gold seen choppy Friday, lacking clear direction 


 
   By Francesca Freeman

LONDON--Spot gold is up just slightly in Europe Friday, its performance overshadowed by a sharp uptick in the price of platinum amid escalating violence at the world's third-largest platinum mine in South Africa.

At 0947 GMT, spot gold was just 0.2% higher on the day at $1,617.11/oz, trading in a tight range and lacking any clear near-term direction. By contrast, spot platinum was up 1.1% at $1,448.50/oz, having earlier hit a more-than one month high at $1,458/oz. In the Thursday and Friday's sessions alone, the platinum price has jumped around 5%.

Driving platinum gains Friday are supply-side concerns as violence rages on at Lonmin PLC's South African platinum mine. The death toll in a clash between police and Lonmin mine workers climbed Friday, with the South African police minister saying at least 30 people died.

The company said Thursday it will most likely miss its full-year production target of 750,000 troy ounces of platinum as a result of lost output due to unrest after 3,000 rockdrillers began a strike last week.

While most industry participants still forecast the platinum market to record a substantial surplus this year, the risk that unrest at Lonmin could spread to other producers in the region is driving bullish bets on the metal, said analysts.

"While lost platinum production so far does little to put a dent to our estimated surplus of 210,000 ounces, the risk is that the situation starts to infect other major operations in South Africa," said UBS analyst Edel Tully.

Unrest at Lonmin's mine is the latest deadly labor battle in South Africa, where a power struggle between unions has sparked violent outbursts at mines, and frustrations over high unemployment and economic inequalities have fueled protests. South Africa accounts for 80% of global platinum supply.

For the rest of the complex, trade is expected to be rather directionless in coming sessions.

"We suspect that choppy markets will be the order of the day on Friday and going into next week," said INTL FCStone analyst Edward Meir. Further ahead, "a hurried round" of policy meetings scheduled over the coming weeks should provide some more concrete direction for precious metals such as gold, he added.

"Out of the U.S., markets will be watching the Jackson Hole meeting of central bankers scheduled for the end of the month, at which point some clarity on the outlook for quantitative easing is expected to emerge. The Fed itself later meets on Sept. 12-13," said Mr. Meir.

Since gold is often sought as a hedge against currency weakness and inflation at times of loose monetary policy, economic stimulus measures tend to support prices.

Elsewhere in the precious metal complex Friday, spot silver was up 0.2% at $28.240/oz and spot palladium was up 0.6% at $583/oz.

Write to Francesca Freeman at francesca.freeman@dowjones.com (Devon Maylie in Johannesburg contributed to this report)

(END) Dow Jones Newswires

August 17, 2012 06:10 ET (10:10 GMT)