Written Commentary
GOLD / SILVER
Given the three-pronged invasion of Ukraine overnight internal fundamentals in the gold and silver trade are unlikely to be key driving forces for prices. It has come to light that Russia saw a significant boost in December oil exports and piled up as much as $630 billion in foreign currency and gold reserves. In other words, the Russians appear to have premeditated the invasion and are set up for a long-term operation. Therefore, flight to quality interest should remain a hallmark of the gold and silver trade in the coming sessions with the Russian threat providing the gold and silver trade with a “Ukraine put”. Therefore, two-sided volatility is likely to become a constant condition in the market with influences like action in the dollar less important than action in crude oil prices.
PALLADIUM / PLATINUM
In the early going today the palladium market is up $177 an ounce and at times has been up $200 an ounce and that is not surprising considering Russia is the world’s largest exporter of the metal. In recent statistics Russia exported $6.4 billion worth of palladium which amounts to 20.7% of the world’s export flow! The revelation that Russia stored up foreign currency and gold reserves and given news of increased Russian oil exports in December suggest the Russians have planned for a long-term campaign. While the world platinum market does not have as much reliance on Russian supply as palladium, the market should track along with palladium in the near term. Understandably, platinum has not tracked with palladium over the last 2 years but in the current condition, the threat against supply of palladium extends to platinum and automakers were already shifting their catalytic converter production to cheaper platinum.
COPPERWe are surprised by the copper market’s initial reaction to the invasion of the Ukraine, as the market recently has been embracing the fear of softening demand and has been discounting the potential for a disruption of copper supply flow from Russia. Obviously, the surge in physical commodity prices provides copper with tailwinds especially with aluminum hitting a record in London and nickel prices recently lifted off the fear of extremely tight supplies.
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