Palladium Hits 11-month High on Russia, South Africa Turmoil

Earlier this week, gold and silver prices gained as Ukraine mobilized for war following Russia’s seizure of Crimea. 

Since then, prices for those metals have slipped back down, largely due to the fact that Russia and the western world have begun talks aimed at settling what CBC News describes as “Europe’s gravest crisis since the Cold War.”

For palladium, however, those talks have had a markedly different effect. The precious metal jumped yesterday to $779.50 per ounce, an 11-month high, on the back of the US government’s comment that it is ”prepared to enact financial sanctions on Russia” if the country doesn’t pull its troops out of Crimea, The Wall Street Journal states.

Meanwhile, palladium futures for June delivery rose to $783, also an 11-month high, though they later fell back down to $772.85, according to Bloomberg.

Explaining the gain, Nicholas Brooks, head of research at ETF Securities, told Forbes that trade sanctions “could constrain [Russia’s] ability to export palladium to the world market. Russia produces around 41% of the world’s palladium, so that could have a huge impact on the supply/demand balance.”

That said, palladium prices likely would not have seen such a dramatic rise were it not for the strikes currently taking place at the South African operations of major platinum-group metals producers Lonmin (LSE:LMI), Impala Platinum Holdings (OTCMKTS:IMPUY) and Anglo American Platinum (OTCMKTS:AGPPY). Engineered by the Association of Mineworkers and Construction Union, they recently entered their sixth week and are still far from being resolved.

On that note, David Govett, head of precious metals at London’s Marex Spectron Group, said in a report, “[t]he overall picture is still very much all about Ukraine and Russia. With mutterings of sanctions against Russia along with the continuing situation vis-a-vis strikes in South Africa, it was only a matter of time,” as per Bloomberg.

Whether sanctions will in fact be put in place remains to be seen. Forbes quotes UBS (NYSE:UBS) analyst Joni Teves as saying that “the market believes that trade sanctions against Russia are a real possibility,” but of course that doesn’t necessarily mean the US will go through with them.

If it does, Gautam Batra, an investment strategist at Signia Wealth, believes that “prices are likely to trend toward the $1,000 mark,” The Wall Street Journal states.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.