30 May 2022

Market Analysis

Metals are heating up ‌in 2022

What was once a safe haven basket for big investors has now become a wild animal with behavior similar to cryptocurrencies. And the big news now is that Russian metals have been removed from the London market. Which metals will be affected by this is clear, and traders are already setting strategies. Let's take a look at 4 of the most popular tradable metals and speculate about expectations for the coming months.

Trading Palladium

Why is Palladium in global demand? Palladium is a vital component in the production of vehicles. It is used in catalytic converters by every car manufacturer in the world to reduce emissions.

Palladium is a rare metal only mined in a few places, and Russia is perhaps the biggest supplier. In fact, Russia has been serving 40% of the global palladium demand for decades, but recent sanctions have halted supply chains and we’re seeing the beginnings of a shortage in the marketplace.

In late February, early metal speculators responded to an expected scarcity fear with panic buying, and Palladium rocketed to $3294 per ounce. A massive 40% increase in just 8 days. On 9 March, investors abandoned ship at the all-time-high, causing the precious metal to crash to below $2000.

Since then, fear related volatility and high-volume opportunistic trading has subsided due to uncertainty, but it's possible that we are now looking at a potential long-term Palladium price increase in the coming months. The world can’t simply turn to another Palladium supplier who was overlooked until now, so keep your eyes on XPDUSD.

Platinum price push

Platinum is a very desirable substance with rising demand. And it's another raw metal affected by the ongoing conflict, since Russia is the second largest supplier. Around 50% of all global Platinum is used in the manufacturing of catalytic converters. With Russian materials no longer accepted in the global trading market, it’s not unreasonable to expect Platinum prices to rise as growing scarcity affects the supply/demand dynamic. Add XPTUSD to your watchlist and start forecasting the long-term.

Gold & Silver anomaly

In late February, gold was on a steady rise. Suddenly, the price rocketed on 4 March hitting an all-time high on 9 March, but then it began a one-week crash the very next day. Mainstream media didn’t predict it, and still can’t explain it.

Some financiers point to high-volume capitalization on the media hype that was circling the world, which caused fears of EU currency destabilization. The belief is that hedge fund managers and fat-cat investors jumped on the speculative media hype of that week and further fueled an already bullish gold trend, spiking at $2058 per ounce. The whales cashed out triggering a panic sell and gold flash-crashed falling 6% in less than a week to $1910.

Now that panic and hype volumes have subsided, gold seems to be back to business-as-usual, with silver following at its heels as always. The key takeaway here is that XAUUSD can be volatile, no matter the political circumstances, and will probably remain as unpredictable as ever in 2022.

Summary

If supply chains of any high-demand commodity diminishes, then prices obviously react. This is the nature of the markets. The sanctions and restrictions on Russia will most definitely affect Platinum and Palladium supplies and therefore prices, but gold and silver have no reason to go beyond the norm, unless another hype triggers irrational trading behavior. Watch out for that!

We might even see a significant divergence in precious metal price moves for the first time ever, so keep your eyes on the big four metals in the coming months.

Related articles