The ongoing platinum miner strike, which involves some 70,000 workers, is taking its toll on South Africa’s growth outlook. Contracting growth is weighing on Africa’s second largest economy, and the central bank is looking to do something rather contrarian: hike interest rates.
Interest rates are usually increased as a country’s economy strengthens, but South Africa is one more quarter of negative growth away from a technical recession, which contracted .6 percent in the first quarter. “There is no question that we are in a rate-hiking cycle,” according to the Reserve Bank Deputy Governor Daniel Mminele. The rate increase is likely to combat increasing inflation, which has expanded beyond the three-to-six percent inflation band target to 6.1 percent.
Mminele mentioned the labor strike that has continued through 18-weeks, “the situation has not improved much in the sense that strikes in the platinum sector is obviously still upon us.”
Platinum has broken through an 30-day, intraday downtrend created after peaking out at $1,497.8 per ounce. Support has been found at $1,460, where the broken downtrend now becomes minor support. However, price action looks to be held by $1,468. A move above resistance, and the 50 EMA, will lead the way for a move higher to $1,474.70.
A reestablishment of the downtrend would cause traders to seek out support at $1,454.3, which is currently the 200 EMA.