Looming South Africa Strike Could Boost Short-Term Gold Prices

If you’re planning on buying gold later this summer or in the fall, you might want to consider acting sooner.

A looming miners strike in South Africa could push gold prices up in the near to medium-term.

According to a Reuters report, “South Africa’s Association of Mineworkers and Construction Union [AMCU] could launch a wildcat strike if its rival union and gold mining companies extend a wage deal to its members.”

Under South African law, wage deals between a majority union and employees can be extended to smaller unions. The National Union of Mineworkers (NUM) controls the gold industry in South Africa. It wants an 84% wage increase for its members.

AMCU demands include more than a doubling of wages from AngloGold Ashanti, Sibanye Gold, Harmony Gold and Pan African Resource’s Evander Mines. According to the Canadian Labor Reporter, the union represents nearly 30% of the workforce in the South African gold sector. The AMCU, often described as “radical,” has been gaining membership in a “turf-war” with NUM.

South Africa ranks sixth in the world in gold production. Last year, the country produced 150 metric tons of the precious metal.

An AMCU strike in South Africa’s platinum sector last year devastated the industry. Reuters called it the “most damaging strike in the country’s history.”

The five-month strike hit 40% of global production of the precious metal and has cost Lonmin, Anglo American Platinum and Impala Platinum a combined 24 billion rand ($2.25 billion) in lost revenue.“

During the strike, the price of platinum increased over 8%.

Read Peter Schiff’s commentary from last year about the platinum supply shock.

While AMCU strike would not likely impact the South African gold sector to the extent of the platinum strike, a work-stoppage along with the accompanying labor unrest in the world’s #6 gold producer would almost certainly push short-term prices up.

With a strike looming, investors already planning to purchase gold in 2015 should seriously consider acting sooner rather than later.

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