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Platinum, Palladium Prices Soar amid Supply Concerns

A 17-week strike at South Africas PGM mine has caused Platinum and Palladium prices to skyrocket to the highest levels in three yearsNews of renewed vio...

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|May 23|magazine5 min read

A 17-week strike at South Africa’s PGM mine has caused Platinum and Palladium prices to skyrocket to the highest levels in three years

News of renewed violence in South Africa have caused platinum and palladium prices to climb nearly 16 percent this year. On Thursday, prices for the precious metal were at their highest levels since August 2011.

Metal analysts said palladium prices could continue to rise, possibly reaching the $860 an ounce area, which would be near the February 2011 high on a continuation chart. Platinum for July delivery rose 1.2 percent to $1,493.10 a troy ounce, the highest since Sept 2013.

A huge factor for the increase in price can be attributed to the ongoing strike. Since January 23, over 70,000 workers from the world’s three largest platinum and palladium producer, Anglo American Platinum, Impala Platinum and Lonmin have been on strike. South Africa’s labor court said earlier this week it would mediate fresh talks between the mining companies and workers’ unions as workers are seeking higher wages, which the companies say they can’t afford. The talks have been ongoing for weeks without success. 

"There is a great deal of uncertainty in these markets right now, and that's pushing prices" higher, said Peter Hug, global trading director at Kitco Metals.

Roughly 10,000 ounces of platinum production and 5,000 ounces of palladium are lost each day the strike continues, costing the industry $1.8 billion in lost revenue. South Africa supplies approximately a third of the world's palladium and 80 percent of its platinum.

With the stoppage in production causing prices for the metals to soar, many market analysts believe it has potential to run higher.

One of the principals with LOGIC Advisor, Bill O’Neill, disagrees. He said short-term chart indicators suggest palladium may be overbought and if an agreement is made between the workers’ union and the mining companies, palladium will see a correction.

 “The thing about strikes is that when they reach a resolution, markets can slump very quickly,” Smith said.