Palladium at Highest Since 2011 on Ukraine as Gold Gains – by Nicholas Larkin and Glenys Sim (Bloomberg News – April 14, 2014)

http://www.bloomberg.com/

Palladium rose to the highest price since 2011 in New York on concern supply may be restricted as tension escalated over Ukraine. Gold reached a three-week high.

Russia and the U.S. traded barbs at an emergency meeting of the United Nations Security Council as a deadline passed for pro-Russian separatists to leave buildings they occupied amid escalating violence in eastern Ukraine. The U.S. and European Union have vowed to impose tougher sanctions on Russia if President Vladimir Putin’s government makes another move threatening Ukraine’s sovereignty.

Palladium advanced 13 percent this year as the threat of disruption to Russian exports compounded concerns about supply spurred by a miners’ strike in South Africa that started in January. The nations are the world’s biggest producers. Gold futures climbed 1.2 percent last week as a weaker U.S. dollar and falling equities increased demand for a haven.

“It’s a double-edged sword for palladium, we’re seeing robust demand and also supply constraints,” James Moore, an analyst at FastMarkets Ltd. in London, said today by phone. “You’ve got the South African strikes and concern regarding Russian sanctions as tension bubbles along. Investment demand is strong.”

Palladium for June delivery rose 0.4 percent to $810.10 an ounce by 7:45 a.m. on the New York Mercantile Exchange. It reached $815, the highest since August 2011. Futures trading volume was almost double the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Palladium for immediate delivery gained 0.7 percent to $810.70 in London, according to Bloomberg generic pricing.

Ukraine Turmoil

Protests escalated near Slovyansk, about 240 kilometers (150 miles) from the Russian frontier. Camouflaged gunmen fired on Kiev government troops in an anti-terror operation, killing one serviceman and wounding five, the Ukrainian government said. Russian officials, businessmen and a bank have been blacklisted in response to the annexation of Crimea.

While palladium and platinum may be less likely to be subjected to western sanctions than other metals because of the difficulty in replacing them in European and U.S. markets, they may be a potential target of Russian counter-sanctions, Goldman Sachs Group Inc. wrote in a report yesterday. Palladium particularly is a “crucial and not substitutable input” in the car industry, it said.

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