Platinum and palladium ETFs shot up Friday as the death toll
at a South African mine reached 34.
At least 78 other people were injured in clashes between
police and workers at the Marikana platinum-mining complex owned
by Lonmin PLC, the world's third-largest platinum miner. About
3,000 workers walked off the job a week ago demanding higher
wages. Lonmin claims the strike turned violent because of
rivalries between two unions.
ETFS Physical Palladium Shares (
) rallied 4% to a two-month high of 59.73 a share.
UBS E-TRACS Long Platinum ETN (
) surged 3% to 17.01, a one-month high.
On the futures market, platinum rose 2.37% to $1,477 an ounce.
Palladium climbed 3.26% to $609 an ounce.
"I believe this is a news-driven reaction to a possible supply
disruption," said Terry Sacka, chief strategist at Cornerstone
Asset Metals in Jupiter, Fla. "I don't see this as a sustained
rally. We probably won't see significant moves in platinum or
palladium until we get the overall precious metals rally."
Both metals are trading near 52-week lows and have lost about
20% in the past year on soft demand from the lagging auto
industry, which uses platinum in catalytic converters. The two
metals can be substituted for each other. Both PALL and PTM trade
deep below their 200-day averages and have weak IBD Relative
Strength Ratings in the high teens, both of which are bearish
Demand for platinum remains soft, said Timothy Evans, chief
market strategist at Long Leaf Trading Group in Chicago. He
projects platinum will rise to $1,535 an ounce, up 4% from
Friday's level. He says he might raise his price target if
conflict over the work stoppage worsens.
Thirty times rarer than gold, platinum normally costs more per
ounce, but it hasn't since 2009. With 80% of platinum mining
happening in South Africa, platinum's prices should surpass gold
within a year, says David Morgan, publisher of The Morgan Report,
which specializes in precious metals. As of Friday, gold traded
at $1,622 an ounce.
In afternoon trade,
SPDR S&P 500
) andSPDR Dow Jones Industrial Average (
) were nearly flat.
PowerShares QQQ (
), a basket of the 100 largest nonfinancial stocks on the Nasdaq,
SPY has rallied 12% from its June low, DIA 10% and QQQ
"The stock market finally got out of neutral, and may be
finally entering the 'sweet spot' of the rally that started in
early June," Mark Arbeter, chief technical at Strategist at
S&P Capital IQ in New York, wrote in his weekly report. "It
is not until everyone and his mother are aboard the bull train
that a top will occur."
"When it looks like the market is overbought and ready to roll
over, it gets more overbought," he added.
On the other hand, market bears say the market is overbought
and are troubled by the low trading volume during the summer.
"The rally involving historically low volume, characterizes a
general lack of enthusiasm from individual investors and a strong
likelihood that the market is being pushed up temporarily by high
frequency or algorithm trading," Jeff Sica, founder of SICA
Wealth Management in Morristown, N.J., wrote in a client note.
"The market has factored in a positive outcome in Europe, which
is highly unlikely, as well as the potential for more printed
money from the central bank in September."
The market is "destined to fall as the crisis in Europe
accelerates and the Fed fails to rescue the economy," he added.
"Although more global stimulus is likely, the impact on the
overall economy will be limited."
He expects the market to fall by double digits before the
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, was mostly flat, shedding 0.06%.
IShares MSCI Emerging Markets Index (EEM) fell 0.73%, led by a
sharp 3% drop in South African stocks.
The Thomson Reuters/University of Michigan preliminary August
index of consumer sentiment unexpectedly improved in August,
after sliding for two months, boosting the prospect of stronger
household spending this quarter, Bloomberg reported. Retail sales
rose 0.8% in July, the biggest increase since February and the
first in four months, the Commerce Department reported.
The unemployment rate rose in 44 states in July, the Labor
Department reported. Nonfarm payrolls increased in 31 states.
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