Precious metals soared on Tuesday, with palladium and gold leading the way, as traders remain fully focused on the Ukraine crisis after western countries slammed Russia with harsh sanctions.
Supply concerns due to tougher sanctions against Russia pushed up prices of palladium, which is used by automakers in catalytic converters to curb emissions.
Palladium rose more than 3.5%, while feelings that the war and higher energy prices could slow the interconnected global economy helped gold.
A Russia-based company accounts for about 40 percent of global palladium mining production, as data from last year showed, and that has weighed on supply difficulties.
“We see sanctions starting to bite,” Saxo Bank analyst Ole Hansen told Reuters.
“Russian mining companies, such as the world’s largest palladium producer, are exploring alternative transportation routes. However, we believe the sanctions and associated restrictions will make it difficult to charter planes to export materials,” Commerzbank analysts said in a note to customers. . †
Escalating tensions between Russia and Ukraine have helped gold prices, with US gold futures rising more than 1 percent.
The sanctions are likely to encourage the Bank of Russia to buy gold again. Bank of Russia announced it will be buying gold again, nearly two years after ending a long string of purchases.
In addition, gold will also receive a boost from higher inflation trading as the yellow metal is usually considered a hedge against inflation and during times of economic or political turmoil.