May 2014 Price Report

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May 2014 Price Report

Platinum

Further encouraging signs over the health of the world's largest economy led the Federal Reserve (Fed) at the end of April to announce a fourth consecutive monthly $10 billion reduction in asset purchases in its drive to wind down quantitative easing. Economic optimism provided the backdrop for the precious metals complex during May and, following initial weakness, laid the foundation for appreciation in the US dollar for most of the month. Dollar strength was exacerbated by a weaker euro following comments from the European Central Bank (ECB) that it was considering relaxing monetary conditions in the Eurozone in response to tepid growth and deflationary concerns. In response to a stronger dollar gold tended to underperform, trading in a narrow range before finishing May on a weak note, down 2.9% overall.



Though platinum generally tracked gold (the two moved in tandem in sixteen out of twenty trading days), the former managed to significantly outperform the yellow metal (and thereby decouple itself from the US dollar), particularly during the second half of May, as market fundamentals came to the fore in the form of continued strike action in South Africa. Early in the month a breakdown in the latest round of negotiations between the Association of Mineworkers and Construction Union (AMCU) on the one hand and Amplats, Impala and Lonmin on the other saw platinum rise by 1.8% on 6th May, the fifth largest daily increase of the year so far. The parties remained far apart in their positions, with AMCU rejecting the latest offer of a 10% increase in cash remuneration, instead sticking to its demand for an increase in the basic wage to R12,500 over four years.

The mining companies subsequently circumvented AMCU and went directly to employees in an attempt to diffuse the stand-off and encourage workers to return to work. Though there were some strong indications that a significant proportion of workers favoured accepting a compromise solution, intimidation in the form of the threat of violence ensured not enough workers were able to safely return to work to allow the mines to resume operations. Though the market remained adequately supplied by above ground stocks and the release of inventory from the mines, the platinum price continued to perform strongly in the absence of any immediate hope of a breakthrough and reached a new year-to-date high of $1492 on 22nd May, during another round of mediation.

Though platinum subsequently sold-off sharply on the unfounded rumour that a breakthrough in talks had been achieved, the price managed to finish the month 2.8% higher, simultaneously opening up a $200 premium to gold once again, for the first time since January.

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Platinum 0900 London Base Prices - May 2014
  High Low Average
$ per oz 1,497.00 1,428.00 1,460.29
£ per oz 892.67 851.52 870.78
€ per oz 1,218.06 1,161.92 1,188.19


Palladium

Though platinum generally tracked gold (the two moved in tandem in sixteen out of twenty trading days), the former managed to significantly outperform the yellow metal (and thereby decouple itself from the US dollar), particularly during the second half of May, as market fundamentals came to the fore in the form of continued strike action in South Africa. Early in the month a breakdown in the latest round of negotiations between the Association of Mineworkers and Construction Union (AMCU) on the one hand and Amplats, Impala and Lonmin on the other saw platinum rise by 1.8% on 6th May, the fifth largest daily increase of the year so far. The parties remained far apart in their positions, with AMCU rejecting the latest offer of a 10% increase in cash remuneration, instead sticking to its demand for an increase in the basic wage to R12,500 over four years.

The mining companies subsequently circumvented AMCU and went directly to employees in an attempt to diffuse the stand-off and encourage workers to return to work. Though there were some strong indications that a significant proportion of workers favoured accepting a compromise solution, intimidation in the form of the threat of violence ensured not enough workers were able to safely return to work to allow the mines to resume operations. Though the market remained adequately supplied by above ground stocks and the release of inventory from the mines, the platinum price continued to perform strongly in the absence of any immediate hope of a breakthrough and reached a new year-to-date high of $1492 on 22nd May, during another round of mediation.

Though platinum subsequently sold-off sharply on the unfounded rumour that a breakthrough in talks had been achieved, the price managed to finish the month 2.8% higher, simultaneously opening up a $200 premium to gold once again, for the first time since January.



Palladium 0900 London Base Prices - May 2014
  High Low Average
$ per oz 848.00 808.00 829.38
£ per oz 505.66 481.81 494.56
€ per oz 689.99 657.45 674.84


Rhodium

During the first week of May the rhodium price continued the steady decline that had begun in early April, falling a further $50 to rest at $1030 by the 7th. The subsequent two weeks proved to be uneventful, during which the price failed to move. However, in the final week of May the seemingly intractable labour dispute in South Africa combined with the emergence of speculative purchasing in Asia, which in turn precipitated buying from concerned industrial players, all helped rhodium to jump $150 in three days. Having reached $1180 by the 27th, the price ended the month slightly weaker at $1160.



Rhodium 0900 London Base Prices - May 2014
  High Low Average
$ per oz 1,180.00 1,030.00 1,071.43
£ per oz 703.64 614.19 638.90
€ per oz 960.13 838.08 871.79