A few weeks ago, in mid-August, platinum (and several other metals) started in on a substantial upward move. Spurred on by the strikes and violence breaking out in several South African mining companies, supply concerns continued to drive prices higher and higher. Now it looks like a big step toward resolving that dispute has taken place. Via the Guardian:
Striking platinum miners in South Africa have accepted an agreement with Lonmin and plan to return to work on Thursday, all but ending five weeks of acrimony, bloodshed and tragedy.
The police massacre of 34 protesting mineworkers at Marikana last month was the worst display of state violence in the country’s post-apartheid history. In all 45 people died during the bitter industrial action. Unrest spread to other mines, threatening the backbone of South Africa‘s economy.
On Tuesday strikers gathered near the Marikana mine 60 miles north-west of Johannesburg cheered when they were informed of London-listed Lonmin’s final offer. It includes a 22% pay increase for rock drillers – taking their salary to just over 11,000 rand (£825) – and a one-off payment of 2,000 rand (£150) to help cover nearly six weeks of not being paid while on strike, Bishop Joe Seoka, a member of the negotiating team, told Associated Press.
Wonder if that reassured investors? Let’s take a look at yesterday’s platinum futures chart and see if we can spot the moment that news hit:
Chart courtesy Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.
One word comes to mind when looking at this chart: ouch. That’s a 5-minute chart, by the way. Platinum fell by nearly $50 in less than 15 minutes – almost a -3% drop. Of course, the move hasn’t quite come close to wiping out the entire rally; platinum rose to $1700 from less than $1400 between August and September.
A quick, vicious tear downward is definitely not what trend followers would like to see. The longer prices stay high, the more likely that their trailing stops will rise to lock in greater profits on the trade. Several managers we track have been riding the metals higher, such as Briarwood Capital Management (who had broad metals exposure, so they’re likely not feeling the pinch from platinum’s snapback too badly). Through the end of last week, their Diversified Trading Program was up 5.13% (Disclaimer: past performance is not necessarily indicative of future results).