As sanctions against Russia pile up in response to the escalating situation in Ukraine, investors should keep an eye on precious metal prices as the supply of raw materials could be derailed, according to the BMO report. Tensions rose on Tuesday as the West reacted to Russian Vladimir Putin’s announcement that he was recognizing two self-declared republics in eastern Ukraine and ordering troops to be sent there as “forces of maintain the peace”.
“We are implementing full blocking sanctions on two large Russian financial institutions … We are implementing comprehensive sanctions on Russia’s sovereign debt. That means we’ve cut off Russia’s government from Western financing,” Biden told the press on Tuesday. “Starting tomorrow, we’ll also impose sanctions on Russia’s elites and family members … We’ll continue to escalate sanctions if Russia escalates.”
Biden described Russia’s actions as “the beginning of Russia’s invasion of Ukraine.”
“Ultimately, we would expect a redistribution of Russian commodity exports away from Europe and North America, and toward China. Russia has already committed to sending 100Mtpa of coal into China over the coming years, which will help China offset its Australian coal ban,” said BMO Capital Markets commodities analyst Colin Hamilton.
Redirecting present alternate routes could display up as brief dislocations in marketplace fundamentals, Hamilton stated withinside the report. And the commodities so that it will be the maximum uncovered to deliver shortages are valuable metals, consistent with BMO. Palladium sticks out the maximum out of all valuable metals, with Russia accounting for 39% of world subtle deliver. Palladium’s charges have already surged 24% year-to-date. And any extra deliver disruptions from Russia may want to cause a fair greater massive jump, Hamilton warned.
“Supply uncertainty, supplemented by recovering auto production, has seen palladium prices rally … while Russia is expected to make up 9%, 6%, 11%, and 8% of gold, silver, platinum, and rhodium supply, respectively,” the report said.
On top of supply concerns, the safe-haven enchantment of the valuable metals is attracting extra traders who’re seeking out protection amid a worldwide shares selloff.