Palladium Breaks Multi-Year High Over $900; Russian SWIFT Payment
Ban Proposed By UK
The palladium price made a new 13 year high today and reached $909/oz, its
highest since February 2001. Markets fear that the global supply of palladium
could be impacted by the threat of further sanctions against Russia.
Palladium in U.S. Dollars - 20 Years (Thomson Reuters)
The Russian mining industry has not been the target of sanctions so far, but
with the oil sector already affected and the gas sector possibly the target
of upcoming sanctions by the EU, markets remain fearful.
Russia is the world’s largest palladium producer accounting for over 40%
of global production. This is mainly through Norilsk Nickel, the world’s
largest mining company which mines nickel, copper and palladium in the area
of Norilsk in Siberia, the world’s most northerly city. Palladium is mined as
a by-product of nickel and copper mining.
The majority of palladium produced is used in automobile catalytic converters
and demand has been buoyant recently due to higher sales in the auto
industry. Recent miner strikes in South Africa have also disrupted supply for
the big South African palladium producers, Amplats, Impala and Lonmin.
Investment demand for palladium has also been strong recently and as acted
as a competing demand to industrial users.
EU Draws Up Further Sanctions Against Russia
Diplomatic fallout from the conflict in Ukraine continues to intensify.
Amid claims and counter-claims by the Russian and Ukrainian sides concerning
the fighting and incursions in Eastern Ukraine, the war of words has stepped
up.
Russian President Vladimir Putin was quoted as saying last Friday that
"I want to remind you that Russia is one of the most powerful nuclear
nations. This is a reality, not just words." While visiting EU leaders
in Brussels at the weekend, Ukrainian President Petro Poroshenko said “we are
very close to the point of no return, which is full scale war.”
As fighting continues, European Union leaders met in Brussels yesterday
and recommend that the European Commission draw up further economic sanctions
against Russia that would be imposed unless Russia demonstrates a
de-escalation of its involvement in the conflict in Eastern Ukraine.
The recommended proposal includes “a provision on the basis of which every
person and institution dealing with the separatist groups in the Donbass will
be listed.” Donbass is the region in eastern Ukraine that encompasses
the Donetsk and Luhansk areas that are currently the scene of the heaviest
fighting in the conflict.
Up until now, the EU’s sanctions against Russia have targeted specific
individuals, and a number of companies in strategic industries such as the
Russian financial sector and high tech oil sector equipment sector.
The next set of potential sanctions is believed to still focus on the
energy and finance industries, but would extend to sectors such as Russia’s
gas sector., and step up the financial sanctions.
In the financial area, there appear to be plans by the EU to continue to
limit access for Russian companies to the western financial markets. Further
financial sanctions have also been discussed such as attempting to limit
Russian access the sovereign bond markets and access to syndicated lending
deals but, for now, these broader financial sanctions appear to be in
reserve.
Russia has already imposed a ban on EU food imports and the EU is still
fearful of retaliatory economic sanctions from Russia, which could extend to
the EU aerospace, shipbuilding and car manufacturing sectors. This
could ignite a harmful trade war which is why some EU member states are hesitant
on sanctions at this time.
Last week, the UK was said to be proposing that Russia be blocked from the
international SWIFT bank transfer network. If this occurred it would
essentially shut Russian banks and other companies out of the international banking
network.SWIFT is a Brussels based organisation and so it is
obliged to follow any sanctions that are imposed by the European Commission.
However, the very fact that a proposal even exists to shut out Russia from
the SWIFT network shows that the Ukrainian crisis is now taking on a more
ominous tone, and that geopolitical risk is set to rise from here unless
diplomatic intervention can somehow retrieve the situation.
With a heightened terror threat level being imposed in the UK, a potential
ratcheting up of sanctions on Russia, and the threat of a larger trade and
currency war on the horizon, September should be an interesting month for the
precious metals markets.
by Ronan Manly, GoldCore Consultant. Editor Mark O’Byrne of GoldCore
Sources available on request - info@goldcore.com
MARKET UPDATE
Today’s AM fix was USD 1,287.25, EUR 979.34 and GBP 774.47 per ounce.
Friday’s AM fix was USD 1,285.75, EUR 975.83 and GBP 774.55 per ounce.
Gold fell $2.00 or 0.16% to $1,287.30 and silver slipped $0.05 or 0.26% to
$19.48 per ounce Friday. For the week, gold was up 0.54% while silver
remained unchanged.
Today, the U.S. markets are observing a national holiday for Labor Day.
Platinum is trading at $1,424, unchanged from Friday. Palladium is again
up strongly at multi-year highs at $909, up 1.5% from Friday’s $895.
With the Labor Day holiday today in the US, markets are expected to be
quieter than usual, but given that it’s now September, the remainder of the
week is set to see higher volumes and more market activity as traders return
and refocus following what is traditionally considered the holiday month of
August.
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