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Why You Should Be Watching Platinum Closely

Monday, 8 Jul 2013 | 7:45 AM ET
Platinum bars
Oliver Cleve | Getty Images
Platinum bars

The confirmation of strikes at two Anglo American Platinum mines in South Africa has put the metal back in the spotlight, as concerns mount over unrest during the mining industry's wage negotiation period.

The price of platinum rose on Monday after the world's largest platinum producer said operations at its Thembelani and Khuseleka mines were affected by a strike.

Around 5,600 employees were demanding the reinstatement of 19 workers suspended for participating in a sit-in, Anglo American said in a statement.

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Robin Bhar, head of metals research at Societe Generale, said the unrest had the potential to affect the price of the precious metal.

"If this strike results in a significant loss of production, it's going to help support the price," he told CNBC. "The ongoing industrial unrest across South Africa is already having an impact on platinum prices – and the situation is not going to get better soon."

Growing concerns about industrial action took platinum prices to a near-two-month high of $1,535 per ounce on June 7, following the death of a Lonmin employee at the company's Marikana platinum mine and a strike at one of Impala Platinum's South African mines.

But the metal's price fell, in line with other commodities, following hints from the Federal Reserve about the tapering of its bond-buying program. On Monday morning, platinum rose by around 1 percent to $1,338 per ounce.

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Matthew Turner, precious metals analyst at Macquarie, said the wage negotiation season is a crucial time for the industry.

"The markets have been expecting some strikes as a result of the negotiations; a certain amount of unrest has been priced in," he told CNBC.

"We'll be watching to see the cause of these strikes and how they develop. If there's a serious strike, the price could go up."

But he stressed that, currently, demand was relatively low. "It's not like it would be a supply shock in a tight market. The demand picture is sufficiently weak, so it might not have a huge impact."

The Anglo American Platinum strikes also affected the South African rand, which fell to a two-week low against the dollar at 10.29 on Monday.

"The fact that there could be some loss of production will add to the unease about investing in South Africa, and might result in the rand slipping further against the dollar," Societie General's Bhar added.

So far this year, the rand has fallen by over 20 percent against the dollar.

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-- By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop