(Kitco News) Precious metals are back at the top of the leaderboard posting double-digit gains as commodities market volatility keeps investors looking at gold, palladium, silver and platinum.
Commodity markets rose on Thursday as oil prices surged on fears of a possible supply shortage due to the Russian-Ukrainian conflict.
“Volatility has been a defining feature of all asset classes in recent weeks, fueled by Russia’s invasion of Ukraine,” DailyFX senior strategist Chris Vecchio said. “The global supply chain is in disarray; Commodity prices have risen sharply, threatening both corporate margins and consumer purchasing power, and central banks are pushing for stimulus cuts and monetary tightening.”
The big news that the markets are still digesting is a 25 basis point increase in the Federal Reserve with six more increases expected this year. Adding to this hawkish stance, Fed Chairman Jerome Powell told reporters that the US economy “can handle” tighter monetary policy and that the risk of a recession is not elevated.
“Gold prices are gaining strength despite the FOMC’s undeniably hawkish decision, providing a lifeline for trend followers if prices close above $1,920 an ounce,” strategists at TD Securities said. “Pricing behavior also suggests that a certain contingent sees the Fed’s growth as too slow given the inflationary pressures the economy is facing…While coordinated buying momentum from a broad group of gold traders has helped gold prices soar in recent weeks, we may still see a coordinated reversal inflow.
The Fed’s hawkish stance contrasts with warnings from organizations such as the International Monetary Fund (IMF), which said a Russian invasion of Ukraine would hurt the global economy, slowing growth and putting upward pressure on already-hot inflation.
“The conflict is a major blow to the global economy that will hurt growth and drive up prices,” the IMF said on Tuesday.
The global lender also noted that Russia’s invasion of Ukraine “could fundamentally change” the global economic and geopolitical order “if energy trade changes, supply chains reconfigure, payment networks fragment, and countries rethink their reserve currency holdings.”
Outstanding Prices: Palladium, Silver and Gold
When oil prices rose above $100 again, metal prices also rose. Palladium jumped over 5%, silver was up over 3% and gold was up 1.5% on the day.
“Oil prices are rising again and now Brent and WTI are back above $100. They rose during the day after the Kremlin denied reports of significant progress in ceasefire talks. moving in the right direction, which allowed oil prices to fall significantly from the highs,” said Craig Erlam, senior market analyst at OANDA. “The recovery is also helped by the IEA’s assessment of the oil market, according to which Russian exports are reduced by about three million barrels per day.”
At the time of writing, April Comex gold futures are up more than $30 to trade at $1940.80 an ounce, May silver futures are worth $25.49 an ounce and June palladium futures are trading at $2520 an ounce.
Analysts believe that the rally in gold is currently dependent on the dynamics of oil prices. “If gold prices make another attempt to rise to and overcome their all-time highs, we will need another surge in oil and wheat prices to revive inflation expectations. an ugly monthly candle for gold prices is warning that the highs have been reached and more falls are ahead,” Vecchio said.
It’s also not surprising that gold could see another rally after the Fed embarked on a tightening cycle, Commerzbank analyst Carsten Fritsch said.
“A look at previous rate hike cycles shows that gold has tended to rise since the start of the cycle. It looks like the same thing is happening this time, although it is difficult to compare with past cycles of rate hikes due to the war in Ukraine,” Fritsch explained. “Gold ETFs tracked by Bloomberg registered an inflow of 11 tons yesterday. The inflow since the beginning of the war in Ukraine three weeks ago is 117 tons.”
On top of that, the downside of gold is limited for now due to fears of high inflation and geopolitical uncertainty. “A combination of economic worries, high inflation and reduced risk appetite due to the Kremlin’s comments have contributed to a sharp rise in prices for the yellow metal. Vladimir Putin’s actions, so gold should remain relatively well supported for some time to come,” Erlam added.
Denial of responsibility: The views expressed in this article are those of the author and may not be those of the author. Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a call for the exchange of goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article are not liable for any loss and/or damage resulting from the use of this publication.