Commerzbank make some sense of the moves in Platinum and Palladium
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(Kitco News) - Commerzbank commodities analyst Daniel Briesemann has written a comment about the recent surge in precious metal prices over this week. Briesemann's comments came after gold climbed significantly to a two-month high of $1,840 per troy ounce yesterday afternoon and is still trading at this level this morning. He said "We do not attribute yesterday’s upswing to the US dollar and bond yields – the US dollar depreciated only minimally, and bond yields remain almost unchanged at their high level"
In regards to the reason for the move Commerzbank noted, "yesterday saw substantial buying interest among ETF investors: the gold ETFs tracked by Bloomberg registered inflows of just short of 9 tons, their highest on a single day since mid-November. Precious metals with an industrial character increased significantly more sharply than gold."
Looking at some of the other metals Briesemann said "They were lent buoyancy by two different sides at once: by the firm gold price and by the steep rise in base metals prices (see Base metals below). Silver gained by just shy of 3% and is trading this morning at over $24 per troy ounce, likewise a two-month high."
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Back to the precious metals, the report noted, "Platinum and palladium chalked up even bigger gains: platinum was up by over 4%, while palladium climbed by more than 5%. This saw platinum exceed $1,000 per troy ounce and palladium regain the $2,000 per troy ounce mark. Palladium had even surged by a good 7% for a time yesterday."
He noted the reason for this could be "related to supply concerns amid the Russia-Ukraine conflict, as US President Biden expects Russia to invade Ukraine. In response, the West would presumably impose sanctions on Russia. We believe that Russia could retaliate by limiting or even suspending exports of commodities such as palladium."
According to data from Johnson Matthey, Russia is the world’s second-largest palladium producer-only just behind South Africa – and accounts for 38% of supply. An export ban on this commodity, which is so vital for the automotive industry, could probably not be absorbed, meaning that the palladium market would then be severely undersupplied.