Written Commentary
GOLD / SILVER
While the gold and silver markets are tracking lower early today political pundits think Russia has further designs on the Ukraine than just the separatist regions which it already control. In fact, the source of the selling in gold this morning is likely from the idea that soft sanctions are unlikely to cause an aggressive reaction from the Soviet leader and therefore the flight to quality environment is moderated. However, several economists and strategists have indicated that inflation could be a bigger problem for Western countries than Ukraine because of the battle in the Ukraine (because of surging wheat, corn, and energy prices) and that could help put a floor under gold and silver. On one hand, gold and silver prices rallied yesterday off a combination of flight to quality and increased potential for inflation. On the other hand, the bull camp was largely disappointed in the magnitude of the gains from a flight to quality perspective especially given an actual attack of one sovereign country by another.
PALLADIUM / PLATINUM
While the palladium market did manage a new high for the move and the highest price since January 31st yesterday, the market clearly did not display the type of flight to quality buying interest justified by the threat of a disruption of supply from the world’s largest palladium producer. However, despite Russia’s importance in the world palladium market, sanctions on PGM supply flow might be far down on the list of sanctions and might not be implemented because of the severe negative knock-on impact on the world’s vehicle manufacturers and therefore on the world economy. The platinum market has outperformed the palladium market over the last week and might see a very significant delay in supply flow from Russia as justification for prices to claw higher within the historical range.
COPPER
The copper market continues to consolidate with a sideways chop and little direct correlation to geopolitical headlines. As in other physical commodities the trade does not see early embargoes of Russian involving commodity exports. In fact, the trade has judged the first wave of sanctions as “soft”. Therefore, the sanctions are not expected to deter Russia from taking additional land from the Ukraine. While the equity markets are showing recovery action this morning, the storm has not cleared, and copper is likely to continue to take some direction from the stock market.
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