Gold Slides Even As Ongoing South African Gold Miner Strike Means No Production On The Horizon

Tyler Durden's picture

Anyone wondering what the reason for today's dramatic gold price dump is, look no further than South Africa, where we learn that after nearly two months of endless strikes in the metals and mining complex, the country - the world's fifth largest producer of gold - is nowhere nearer to restoring its mining output. This of course means that less and less gold will hit the market. Which in centrally planned and regulated markets, means gold will collapse far more than the 1% so far, and likely close limit down, with Bernanke's compliment (don't worry that none of this makes logical sense: Heidelberg toner cartridge did a hostile take over of logic long, long ago).

From Reuters:

Striking South African gold miners have refused the industry's latest pay rise offer despite an extended deadline to respond, the Chamber of Mines said on Monday, dimming hopes that the illegal strike in the industry will come end anytime soon.


"The unions have indicated that there have been mixed reactions by their members to the Chamber's proposals, and that they are unable to confirm a return to work," it said in a statement.


The chamber also said the industry was unable to make any further proposals and companies in the sector, which include AngloGold Ashanti, Gold Fields and Harmony , would explore other avenues to stabilise the industry.

One avenue, naturally, would be to raise wages. Problem with that avenue is that the industry would then have to form a cartel like OPEC and sell gold at increasingly higher artificial prices. There is one problem with this plan: Bernanke will make sure it never works, because as is known to kindergarteners everywhere, soaring gold means collapsing fiat faith. And in a synthetic world such as this one, production of physical gold is irrelevant if one can producer 10 times as much paper gold. Which one can, especially if one is located at Liberty 33. The other avenue is to simply do nothing, and go out of business, taking out excess capacity out of the industry not on a temporary but permanent basis, and thereby sending gold to even more bizarro lows.

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Abraxas's picture

It looks like gold is looking for the firm bottom to me and that it's finding it as we speak. Perhaps that's just wishful thinking.

This just in's picture

I've always liked a good firm bottom.

lineskis's picture

Again, annual world wide gold production accounts for ~1-2% of total supply...

sunaJ's picture

Those that buy gold as a medium-to-long inflation hedge should rejoice:  Lower prices for you.  Unless you are looking to sell your physical before the impending collapse, expect wide fluctuations.  If you are not leveraging or rehypothecating it, you have nothing to worry about.  Eventually, the physical demand will outstrip the supply.  I hope this will cause the central planning crisis I am looking for.  It is one of only many scenarios that will shatter the increasingly ceramic structure of fiat economies.

Pladizow's picture

Did Million Dollar Bonus become a Tyler?

caconhma's picture

The greatest myth of the last 70 years was and still is that China and other major developing countries need the USA to sell them their products and services for “close to nothing”. Otherwise, their economies will collapse and their people will be unemployed.


Is this really the truth?

Let us look at China. Selling their goods to America allows their country to get US $$$. These US dollars allows China to keep their people employed and to buy from the West

·        Natural resources for petro-dollars

·        High technologies

·        Food


Now, China is diversifying itself from petro-dollars by buying natural resources from Russia, Middle Asia former Soviet republics, Iran, Iraq, Venezuela, and African countries. Dealing with these countries, China does not really need petro-dollars.



·        The West allows China a very limited access to its high technologies. This is why China started heavily investing in development of their own high-tech capabilities. Taking into account the latest sharp decline of US and EU economies, high-tech development in the West will be highly slowed down

·        Presently, the major China sources and partners for acquiring/buying high-tech are Germany and Japan

·        By reducing shipments of their products to America and EU, China can employ their people to raise their own people standards of living by redirecting their labor force to the internal needs

·        And finally, the USA and EU are extremely heavily dependent on Chinese goods from clothing, shoes, PCs, and almost everything American buy for daily needs. America and EU do not have any of these manufacturing capabilities anymore and there are no other sources to get these products in large quantities in for seeable future.


The summary: China is less and less needs US dollars and America has no other places to exchange China for other suppliers.  This leads us to a major the West and China major economic and military confrontation in a not so distant future.


akak's picture


I've always liked a good firm bottom.

I guess that rules out your liking for Barney Frank --- definitely a bottom, but certainly not firm and very probably not very good.

malikai's picture

One thing you can say about Frank regarding firm bottoms is that he definitely is a firm bottom-feeder.

ParkAveFlasher's picture

The two of you, do us all a favor, go back and delete those comments.

akak's picture

And why don't you grow a pair, you pansy-ass.

RockyRacoon's picture

C'mon guys.  I came here to read about gold... not more political snarking.  Got no time for that.

Gringo Viejo's picture

Ive followed the COMEX paper rigging for so long (20 years), I can see these cocksuckers comin' a mile away. LMAO

Michigan's picture

How does the papper rigging work?

Silver Bug's picture

The bullion banks are winning in the short term. This isn't going to work for them much longer. They are running out of physical.

BigJim's picture

This isn't going to work for them much longer. They are running out of physical.

As a PM holder, I certainly hope that's true.

However, I've heard people saying that since I first started getting into this whole business back in '98. It wasn't true then, and, in all likelihood, it probably isn't true now, either.

And whenever I've read James Turk he's always breathlessly bullish. In fact, whenever I'm feeling a bit downcast about the metals (and miners) I head over to KWN for a bit of hyperbole to steady my nerves. I don't know how much longer that's going to do the job, though, I think I'm building a tolerance to it.

RockyRacoon's picture

Gold bullishism has infinite marginal utility.  We can always use a little more!

fourchan's picture

its funny, my ounces are completly unimpressed with this pull back of the dollar,

they are all just as shiny and beautiful as ever, and i do mean ever, as in from the big bang till today.

pms have no equal as a store of value.

Jungle Jim's picture

I certainly hope so too. ALL my Au and Ag is physical. The Au would maybe fill an ordinary  soap dish if all melted down into that shape. The Ag would be very hard for one man to lift and carry.

What that mostly seems to mean now is that I can't quickly trade out of it or take profits whenever even I can plainly see a "correction"/paper raid-blood bath coming.

I keep adding ounces, and losing money. I mean losing money FAR out the @$$.

It got real old some years ago. Waiting, and waiting, and waiting some more for that Great and Glorious New Day of True Price Discovery and Eldorado or Silverado or whatever, I mean.

Yeah, yeah, my stack is just as tall and just as shiny as ever. Whoop-de-friggin-do.

But it's worth a LOT less on the market, if I should need to liquidate it to pay medical bills or the rent or my car payment or whatever. If I flash a Gold Eagle at Wal-Mart, the checkout girl is going to ask me if it has chocolate in it.

Spitzer's picture

when did u start buying gold ? September 6 2011 ?


ive been buying since late 09, certainly no early bird but even my casey research portfolio is a few percent ahead in this market.

HamFistedIdiot's picture

Catherine Austin Fitts has argued that if the banksters lose control of gold and silver, and they start to skyrocket (in nominal terms) with faith in US dollar collapsing, they will play the war card. Big war. Nukes. Whatever it takes to gain control again. So while $10K gold sounds good, it might mean catastrophe for many of us. I know that Marc Faber has said on more than one occaision that he hopes for a steady rise in the metals (15% per year or so) and thereby avoid the risk of too much notice and likely confiscation.

Conax's picture

Epic sarcasm-  appropriate for today.  5 stars for you.

VonManstein's picture

Some profit taking no doubt but also a simple takedown today. Cartel action. Soon to reverse. commodity complex hammered even though NZD AUD held up, EUR flttish DXY flattish. Not a sustainable move. Shorts will be covered and we'll be rocking again shortly.

However im an extremely bad market timer and im buying right now. XAG and PHYZ

see what tomorrow brings

viahj's picture

CPI tomorrow, housing Wed, revised higher jobless on Thur and existing homes on Fri.  sounds like a take down to me.

whotookmyalias's picture

If we all know that markets are subject to manipulation, we should not be surprised when something happens that smells of manipulation.  Just sayin....

CPL's picture

Did someone just print a trillion dollars...Market is moving against all fundementals again.

CPL's picture

Looks like the PPT blew it's load and there are no suckers to pick up their mess.


They just LOVE painting the corner tighter and tighter.  RSI just shit the bed again and the Russell cares not for manipulation and ignores puny manipulated markets.


Although once the twist get in to Russell indexes the game is over and the USD is meaningless.

disabledvet's picture

The author meant to say production in SOUTH AFRICA is irrelevant. Not "production." which leads (or is it lead?) to the question "can gold suddenly flood the market too?" it's not like all available mines and production numbers aren't already known....what if there is in fact a billion tons stored in the massive "underground cities" of the North?

CPL's picture

There is, but it's in landfills, attached to computers, LCD screens and cell phones.  There's mountains of gold.  No safe and effective ways to extract it without heavy manual labour and sorting.


It's the reason a scrap market exists now.

Quinvarius's picture

I didn't realize they were mining paper gold.  I thought gold came from banker paper accounting statements.

But really, no one knows the real price of gold.  What is the real price of size in delivery?  No one dares find out what 100 tons of real gold costs.  All we know is the paper print and what that lets us get until the retailers run out.  Try to buy 100 tons of physical and get the real price.  It is only $5.5 billion in undeliverable paper.

mick_richfield's picture

Oh, very well.  I'll report back.

Michigan's picture

Do you think China didn't pay spot for their buys?

SilverDoctors's picture

A few months back Andrew Maguire informed us that a large physical silver purchase in the range of 10 million ounces took weeks before the LBMA would agree to deliver outside the LBMA system.  Our friend SRSrocco has discovered that in the same timeframe, the US exported an astonishing 169 metric tons of silver to London.
Co-inkidink?  I don't think so.

Just more evidence that the PHYSICAL silver shortage is real and the midst of the endless paper games and raids.


LawsofPhysics's picture

Yes, shit gets real when the contracts to deliver start to default.  Not before.

CPL's picture

That requires the people holding the paper to be aware that they can recieve their gold or silver.  Ever read the prospectus's on the paper ETF's.  Stereo instructions come to mind.

LawsofPhysics's picture

ETFs are for sheeple and irrelevant.  Page Mr. Sprott,  go ahead regulators raise marigns to 100% I double dog dare you.

CPL's picture

They are such garbage aren't they?


Seemed like a good idea once, but that savage and terrible leveraged decay built into them is lethal to the wallet.

Lore's picture

"Seemed like a good idea once."

There's a good motto for the next 50 years.

whotookmyalias's picture

I trade short term in ETFs in order to make more paper money.  I use said paper money to buy hard assets.  Baaaah!

SafelyGraze's picture

I will never forget the name "Andrew Maguire!"

JustObserving's picture

in the same timeframe, the US exported an astonishing 169 metric tons of silver to London. 

That translates to 5.43 million troy ounces.  So it replensihed just about half the silver sold.  World production is about 800 million ounces a year with about 600 million ounces used up in industrial uses.

Duke Dog's picture

Bot the week before Bernake's QEInfinity and waiting for guaranteed margin hikes to buy again - hopefully soon.

Haager's picture

And - of course - it's hitting mining stocks, even those which are NOT located in SA.

I expect commodities to rise on wednesday. Paper is not demand driven -> there is no free market.

LongBalls's picture

People need to learn how to stomach the up's and down's. Remember...we are in a debt based system. Expanding the money supply is the only way to pay back previous loans. Don't use leverage, buy physical, and sleep soundly. See you at gold $1,800.

crusty curmudgeon's picture

For those who are still having trouble stomaching these downers, rather than enjoying these buying opportunities, here are some comforting words from James Turk.  Everyone who purchases gold and silver without worrying about the price in dollars, agrees with these words:

"In contrast to national currencies, all of which circulate only because of government fiat, Gold's value derives from everyone who understands that it has usefulness as money.  And governments and banks don't like the fact that while they can manipulate gold for a time and as have we have seen in recent years, even a long time; they cannot in the end control the price of gold anymore than they can control the price of a Picasso painting.  The value of a Picasso is determined by the free-market, and so too is gold.  In short, you and I give gold its value not the central banks, not the US government or any other government, either acting alone or together.  But the US government either has not yet learned or refuses to admit this reality that its power to control gold is limited, which is an inexplicable conclusion unless you accept the notion that governments have short memories and need to relearn what logic says they should have learned from experience. If logic prevailed, the US government would have learned from its ill-fated attempt in the 1960's to keep the price of gold abnormally cheap at $35 per ounce that the market determines gold's value.  But instead, the US government is about to learn that it cannot keep a manipulated 'floating-rate' gold price from rising any more than it was able to keep the manipulated 'fixed-rate' gold price from rising thirty years ago.  The free-market rate of exchange between dollars and gold will prevail, eventually repeating today what happened in the 1970's after the artificially low $35 rate was no longer tenable the gold price will skyrocket higher. It is well worthwhile keeping in mind that the gold price rose nearly three-fold in the eighteen months after the fixed-rate price was abandoned in August 1971."

DoChenRollingBearing's picture

Shorter-term production problems are not a problem, as there is a 60 year overhang of stock of gold vs. flow.  But, most of that gold is being held by very strong hands, and much of the (physical) gold that IS being bought is going to China.  I learned that in Italy!

I posted this aalmost two weeks ago (about Italians selling their gold), THIS is one reason among many why I believe gold will soar to almost unimgainable heights:

Quinvarius's picture

It is not possible to have an overhang in gold unless it is also possible to have an overhang in fiat paper.  In that case, the overhang in fiat is much worse.

Lore's picture

Fascinating. Thanks. Makes me want to travel. :-)

ruffian's picture

Bullion Banks tried to run the stops but the specs and hedgies wont budge, so it's a failure. BB's covering now and bottom is in. Specs are wisre to BB's midnight antics and paper pounding. Delivery failure right arounfd the corner, probably dec.

rosethorn's picture

The US Treasury reported on May 31, 2011 that US gold holdings amounted to 261,498,899 troy ounces.

Per the Federal Reserve website this gold is valued at roughly $42 per ounce for reporting purposes.

At $1770 per ounce(today's price roughly), US gold holdings would be worth $462.8 billion; however at the current "book value" of $42 an ounce used by the Federal Reserve the valuation would be only $11 billion.

The US should clearly raise its "book value" for its gold holdings to at least a three digit number; the current book number is absurdly low.

Winston Churchill's picture

About right for salted bullion bars though.

40:1 , damned if that doesn't ring a bell.