The yellow metal is under pressure. XAU/USD has dropped to $1,925 – its lowest level since early March. The hopes of a ceasefire and an end in the near future to the war in Ukraine are causing precious metals prices to fall sharply, economists at Commerzbank report. 

End to the war would substantially reduce the risk of Palladium supply outages

“The hopes of an end to hostilities are also increasing the risk appetite of market participants. This can be seen clearly from the steep rise in bond yields. This raises the opportunity costs of holding gold, which does not yield any interest. In real terms, however, that is to say after deducting inflation expectations, interest rates are still significantly negative, which should preclude any more pronounced price slide.”

“Russia is the world’s second-largest palladium producer after South Africa and accounts for just shy of 40% of the mining supply. An end to the war would thus substantially reduce the risk of supply outages. Furthermore, according to its biggest shareholder, Russia’s largest palladium producer has apparently found new transport routes for its palladium shipments following the closure of air space.”