LONDON (Commodity Online): On the supply side, Mexico’s National Statistics Institute reported its gold output rose by 8.6% y/y to 6.96 tons in June and production is up 14% y/y for H1 11. Its silver output was up 4.2% y/y at 301.6 tons and is up 18% y/y for the year to date. We continue to expect both gold and silver mine supply to grow on a global basis this year with silver’s output growth led by Mexico.
In PGM supply news, the largest platinum producer, Anglo American Platinum has reached a wage agreement with the National Union of Mineworkers (Reuters). The two year agreement increases wages by 8-10% depending upon worker category.
Following Eastern Platinum, this is the first large agreement in the PGM sector with talks with Impala Platinum in arbitration and talks with Lonmin and Northam Platinum set to resume in September. The wage increase is substantially higher than current inflation, in turn continues to provide a higher cost floor for platinum prices.
Price action was mixed across the complex yesterday with palladium and silver edging higher while gold and platinum surrendered some of the previous days’ gains. Gold prices lost 0.6% to settle at $1823.3/oz following better than expected US macro data, the dollar strengthening against the euro and as equity markets continued to recover.
The macro environment continues to set the tone of trading for gold, and following the sizeable net redemptions last week, gold ETP flows have stabilised this week. Gold holdings were down a modest 0.7 tons yesterday with provisional estimates for August showing net outflows of 8.9 tons.
Meanwhile, the latest IMF statistics show central banks continue to be net buyers in July despite small reductions emerging from Kazakhstan, Tajikistan and Mexico (Reuters). In our view, the swing to the demand side by the sector represents a structural shift in the market, and only outright open market sales from the larger holders of gold reserves rather than the smaller central banks would indicate a change in sentiment.
