Everybody's A Buyer, Not a Seller

Feb 9th, 2008

Reported by Kimberly Birkland

Johnson Matthey in Royston, England said it best with "Everybody's a buyer, and nobody's a seller."

The trend continues for precious metals to reach surging highs, while the rand (South Africa's currency) has fallen to a 16-month low.  Against the dollar, the rand has fallen 6 percent just in the past week.  "That has real spooked the market,"de Vleeschauwer said,
"If the government is revising its growth forecast lower, that's a real problem."  Vleeschauwer was referring to the National Treasury General Lestjua Kganyago told Reuters yesterday that the country probably won't meet its 6 percent economic growth target by 2010.

South African's rand decreased for a fourth week against the dollar amidst power shortages, fatal accidents, and inclement weather, which forced the closure of gold and platinum mines.  This will continue to crimp economic growth in Africa, while simultaneously making it a very opportune time to invest in these precious metals.  Supply and demand.  There is a huge demand, and an ever-decreasing supply.

Foreign-investor demand for South African stocks and bonds has fallen this year on concern that slowing economic growth will hurt the $255 billion economy.  These power shortages have reduced exports and will probably widen the current-account deficit, which was equal to 8.1 percent of gross domestic product in the third quarter, the most in 25 years.

Platinum rose to a record in New York on mounting concern that shipments will continue to decline from South Africa and Russia, the world's largest producers of the precious metal.  Palladium jumped to a six-year high as well.

South Africa, which supplies at least three-fourths of the world's platinum, shipped 1.3 percent less in 2007 after fatal accidents led to mine closings at Anglo Platinum Ltd. (bloombergnews.com)

Some forecasts are predicting that power shortages will shut most mines in the country of South Africa.  Eskom has already shut down the mines for five consecutive days last month, which greatly reduced output and surged the precious metals to an all-time high.  Eskom told major customers last week that it wouldn't have sufficient capacity to guarantee adequate power until 2013 (bloombernews.com)

It was also noted that Russia has a very long history of taking advantage of situations like this.  Russia was expected to supply 820,000 ounces of platinum in 2007 and 2.4 million ounces of palladium, Johnson Matthey said in November. 

Platinum and palladium are surging, and so is rhodium, right alongside them.  Rhodium gained the most in more than a year on Feb. 7 extending its advance after power shortages reduced output from South Africa.  South Africa accounted for 86% of rhodium supplies last year.

So, once more, "Everybody's a buyer, not a seller." and Eskom's power problem is not going to go away soon, speculations say maybe not for years.

Reported by Kimberly Birkland on Feb. 9 12:12 PM PST