Weekly update – Rising to the occasion
Matt Girard, from our precious metals team, writes this week’s update.
Following on from my last report, which was in February, it seems as though both questions regarding inflation and the Russia/Ukraine conflict have been answered.
US inflation climbed to 8.5% in March, which is the fastest annual increase in over 40 years. The UK hasn’t fared much better as inflation rose to a 30-year high of 7%. The Bank of England have said they expect this to continue into April, which will see rates rise to 8%.
Peace talks between Russia and Ukraine have been closely followed by the world since the tensions boiled over in February, but as they say – actions speak louder than words. It’s difficult to see how any resolution may be near as Russia continues to advance into Ukraine and millions of people are forced to leave their homes.
But what does this mean for precious metals?
Gold reached a big milestone of $2,000 per ounce in March for only the second time, the previous occasion being at the height of the Covid pandemic in August 2020. It peaked at $2,050 and has since dropped off but is still sitting comfortably over $1,950. The LBMA reported that there is a record value of gold currently held in London vaults, with a total of $603.8 billion (as of end of March 2022)1. Across the water, the US Mint sales figures were up 73% from the previous month for its American Eagle gold coin2. This, combined with strong January sales, has meant that the mint saw its best Q1 in 23 years, with sales figures reaching 426,500 ounces3.
Source: London Bullion Market Association (LBMA)
Silver has followed a similar pattern to gold over the last few weeks, with highs of over $26 per ounce compared to the $23 at the start of the year4. Industrial demand continues to grow with silver being a component in the production of solar panels as well as electric vehicles. As we pursue a greener future it will be interesting to see if the mining industry can keep pace.
It has also been confirmed that following international sanctions, six Russian refiners and three Russian banks have had LBMA membership suspended. This includes two state-owned refineries: the Prioksky and Krastsvetmet plants. The palladium price rose over 8% at the beginning on March on this news5, which isn’t surprising given that Russia represents around 30% of the global supply. The auto sector may face supply issues on the back of this, which would suggest that prices will be given some further momentum in the coming weeks.
Until our next update, we wish you a good week.
1 London Bullion Market Association (LBMA)
2 United States Mint
3 United States Mint
4 London Bullion Market Association (LBMA)
5 London Bullion Market Association (LBMA)