Palladium rose 4.5% to a near six-month peak on Wednesday, driven by fears of a hit to supply from top producer Russia, while gold firmed above the key $1,900 level as Ukraine declared a state of emergency.
Russia is the world’s third-largest producer of gold, while the country’s Nornickel is also a major producer of palladium and platinum, both of which are used in catalytic converters to clean car exhaust fumes.
Russia produced 2.6 million troy ounces of palladium last year, or 40% of global mine production, and 641,000 ounces of platinum, or about 10% of total mine production.
While it was “still too early” to tell if supply issues would materialize, “if we see a set of sanctions that reduce financing and free flow of the material to the rest of the world, we could see a significant tightening of conditions for palladium probably in the not too distant future,” said Bart Melek, head of commodity strategies at TD Securities.
Platinum group metals could see a “pretty significant rally” with palladium likely to reach record highs seen last year over $3,000 an ounce, Melek added.
Silver rose 1.6% to $24.47 per ounce and platinum advanced 1.1% to $1,087.20.
Spot gold gained 0.4% to $1,906.58 per ounce by 01:43 p.m. EST (1843 GMT), having hit a near nine-month high of $1,913.89 on Tuesday.
U.S. gold futures settled 0.2% higher at $1,910.40.
Ukraine declared a state of emergency on Wednesday and told its citizens in Russia to flee, while reports of cyber attacks on several of its state websites added to geopolitical tensions.
The United States and its allies unveiled more sanctions against Russia over its recognition of two separatist areas in eastern Ukraine.
“Should fears over geopolitical tensions subside, that would leave the Fed’s policy tightening path as bullion’s primary driver, with further climbs in real Treasury yields likely to unwind the geopolitical risk premiums currently baked into gold prices,” Han Tan, chief market analyst at Exinity said.