Precious metals price swings persist

The Russia-Ukraine war has led to trade disruptions and global sanctions, causing metals commodity prices to soar.

Ukrainian officials have said that supply trucks and civilian evacuation buses are being prevented from reaching the besieged city of Mariupol by Russian forces. Some 100,000 people remain trapped in the city as suspicion begins to mount that Russian troops are regrouping in nearby Belarus. Negotiations between the two countries are set to resume this week.

However, contributing factors such as speculation of peace talks as well as the fed hike have limited the upside of safe-haven metals, such as gold. Despite being a safe-haven metal, gold is still an investment highly sensitive to rising interest rates, and analysts expect the market to remain volatile, increasing the opportunity cost of holding bullion. 

“When there is this level of market and geopolitical uncertainty, naturally there will be an increase in precious metals prices especially Palladium where Russia contributes close to 20% of world production,” explained director of Majestic Corporation, Peter Lai. For the time being, fluctuations will persist as the situation in Ukraine and Russia continue as peace talks unfold.

“However, overall tone of the market is still supportive of precious metals. There is safe-haven buying and also as an inflation hedge on the retail side. We’re seeing clients coming in wanting to add the diversification of gold to their portfolios,” echoed Chris Gaffney, the president of world markets at TIAA Bank.

On April 1, spot gold price dipped to US$1,927.55, falling 0.49% from the previous day. 

Aside from gold, palladium has also been experiencing swings in price. 

"Palladium is the precious metal most exposed to Russia's invasion of Ukraine," said Carlo Alberto De Casa, external market analyst at Kinesis. As Russia is the world’s largest palladium producer, stricter sanctions on the country can balloon palladium prices.

During the first week of March, palladium prices climbed steadily to a high of US$3339.00. That said, Palladium dropped approximately 17% amidst Russia-Ukraine peace talks two weeks ago, easing worries that the precious metal production may drastically decline.

"There's been a sudden shift of expectations that there might not be much disruption with exports and that we could start to be seeing some demand destruction for the chip sector and auto manufacturers," said Edward Moya, senior market analyst at OANDA.

However, some investors are still erring the side of caution. “Nobody should be fooling ourselves by the Kremlin’s now recent claim that it will suddenly just reduce military attacks near Kyiv, or any reports that it’s going to withdraw all its forces,” Defense Department spokesman John Kirby said at a press briefing. Kirby explained that while “the Pentagon has seen a small number of Russian troops leaving Kyiv in recent days,” it assesses that these movements are reflective of a “repositioning, not a major withdrawal.”

As of April 1, the precious metal’s price fell to US$2,281.00.

Last week, silver gained 2%. Regarding future prices, chief market strategist of BubbaTrading.com Todd Horwitz says that “we know the market promises nothing; however, the price action and the map created by the charts suggest the next move will be lower. The lack of volume and trade is a concern that should lead to a continuation lower. Although equities have tried to push higher, the rallies are weak.”

In the prior week, platinum lost 2.3%. At US$990.25 as of April 1, platinum prices have been experiencing a mostly consistent downward trend within the last three weeks.

A surplus in 2021, platinum supply increased 21% last year, while demand fell by 9%. Experts predict that platinum supply will remain in excess in 2022.

"We've got the largest surplus we've ever recorded yet the market remains pretty tight," commented Trevor Raymond, the head of research at World Platinum Investment Council (WPIC).

However, according to the WPIC, Russia’s invasion could potentially lead to an increase in platinum demand as automakers substitute this metal for palladium. “Small changes in substitution can make a huge difference to platinum demand,” said Raymond. “It just depends on the attitude of the automakers.”

As the Russia-Ukraine crisis threatens inventories and brings upon chip shortages, rising prices push less affluent buyers out of the market. Vehicle sales in the US could fall to the lowest first-quarter volume in the past decade. US car and light truck sales are expected to fall more than 24% to about 1.22 million units in March and decline more than 16% in the first quarter, reports research firm Cox Automotive.

Majestic Corporation has been a leading precious metals recyclers, non-ferrous metals and Catalytic converter provider for around three decades. With a presence in the United States, United Kingdom, Malaysia, Italy, Mexico, Australia, Hong Kong and more, as well as a network of precious metals refineries around the world, we work with major customers and partners in a transparent and discrete manner and only offer the highest quality services at competitive prices. 

Contact us here for more information. For media inquiries, please contact info@majestic-corp.com