On March 1, market analyst Anna Golubova wrote that the uncertainty caused by Russia's use of force against Ukraine was prompting investors to buy large amounts of safe-haven metals as they weighed the impact of sanctions against Russia.
Fears of supply disruptions, unintended economic consequences and more serious inflation pushed precious metals prices to multi-month highs this week. At the same time, Russia has stepped up its attacks on Ukraine.
Markets are spooked by Russia's full-scale invasion of Ukraine, and the geopolitical situation seems to be getting worse day by day.
Win Thin, head of global monetary strategy at the BBH, said: "the Russian military continues to put pressure on Kiev, despite severe sanctions imposed by Western countries. There are reports that a 40-mile Russian armored convoy is on its way to Kiev, while Ukraine claims that Belarusian troops have also entered the country. Putin made it clear that so far he has not been intimidated by Western sanctions, even though they are painful for Russia. We therefore remain convinced that the crisis in Ukraine is far from over and that its full impact on the global economy has yet to be determined. That's why the market is now back to risk aversion. "
Silver rose sharply with gold on Tuesday after the situation in Ukraine deteriorated.
The best performer on Tuesday was silver, which rose nearly 5 per cent on the day to its highest level since last august. Silver is considered to be a metal that fluctuates more with the rise in the price of gold. In May, silver futures on the New York Mercantile Exchange traded at 25.53 US dollars, up 4.78 percent on the day.
Gold is expected to close at a 1.5-year high after rising $120 in February. April gold futures on the New York Mercantile Exchange last traded at $1943.00, up 2.23% on the day.
There are different interpretations of escalating sanctions against Russia and its central bank, and gold (and silver) remains a problem. Nicky Shiels, head of metals strategy at MKS PAMP SA, said: "the market is trying to balance the actual impact on metal flows / supply, as well as the impact on market sentiment / fear (expected war premium) and the impact on inflation (increased inflation premium)."
Bullish factors that are positive for both gold and silver markets include concerns about stagflation and increased purchases of gold by investors and central banks. "SWIFT is back in chaos, cyber attacks, currency market volatility and inflation = the beginning of monetary and financial system change = Gold is a safe store of value until it becomes clear," Shiels said.
Palladium and platinum also strengthened.
Palladium was extremely volatile on Tuesday. After breaking through $2700 an ounce, the price fell by $200, but remained high on the day. At the time of this writing, March futures were at $2541.00, up 1.62 per cent on the day.
Analysts believe palladium was one of the most noteworthy commodities during the conflict between Russia and Ukraine, as Russia accounted for 39 per cent of global refining supplies.
Daniel Briesemann, an analyst at Commerzbank, said: "reciprocal sanctions are posing a growing challenge to the transport of palladium. The European Union has closed its airspace to Russian aircraft, while Russia has also closed its airspace to many foreign airlines. Palladium is usually transported by passenger plane as cargo. Russian mining companies, such as the world's largest palladium producer, are working on alternative transport routes. Palladium prices will remain high in the short term, or even rise further. "
Platinum prices also rose 1.51% on the same day, and (Comex) April futures prices on the New York Mercantile Exchange finally closed at $1054.40 an ounce.
(Commerzbank), the German commercial bank, said supply concerns would continue to push up commodity prices, including precious metals. Far-reaching sanctions are likely to significantly reduce demand for Russian commodities, although the latter has not yet been directly affected by punitive measures imposed by the west. This is because more and more commodity consumers are reluctant to buy oil, liquefied natural gas, coal, metals and grains from Russia because the legal situation is uncertain.
