In times of social, economic and political crises, safe-haven assets like gold come into their own. And as we saw at the height of Covid-19 — a time when gold hit its current record highs around $2,070 per ounce — precious metals stocks can also rise strongly when market confidence sinks.
Prices of these valuable commodities have soared again following Russia’s invasion of Ukraine. Gold is volatile, given the fluid geopolitical situation, and came within fresh all-time highs in recent hours. It’s fallen back, but at $2,010 is within striking range of current peaks. The yellow metal is now 11% more expensive than it was at the start of 2022.
Silver prices, meanwhile, have risen 13% in value since the turn of the year to current levels around $26.30 per ounce. And palladium (up 50% so far in 2022) recently soared to new all-time highs above $3,000 an ounce. Could now be the time for me to buy some precious metal stocks?
Precious metals stocks soar!
Palladium’s rise has been particularly strong as Russia is a major supplier of the metal. Mining companies like Norilsk Nickel help supply 40% of the world’s palladium, a critical material for building automobiles. Prices have leapt as traders and investors consider the impact of sanctions on Moscow to metal supplies.
This has helped certain precious metals stocks to soar in value too. Sylvania Platinum’s share price, for example, recently closed at its most expensive since last summer. And fellow South African platinum group metal (PGM) producer Tharisa has just leapt to all-time highs.
Sanctions raise inflation worries
There are few events to scare investors like war. And the tragic events in Ukraine throw up a range of possibilities that could have a significant impact on the macroeconomic and geopolitical landscape. A prolonged conflict means trade-damaging sanctions could remain slapped on Russia for the foreseeable future. More worrying is the possibility of a large-scale (and potentially nuclear) conflict that would have wide-reaching catastrophic consequences.
Russian sanctions are also having a significant impact on precious metals prices by supercharging inflation. Prices of commodities like oil and wheat are soaring and there’s the possibility of further meaty gains. Plans to ban Russian oil and gas for example could spread following the US’s ruling to stop such imports yesterday.
Gold to hit $3,000?
Of course asset prices can go up as well as down. And in the case of precious metals, prices could fall if central banks ramp up rate increases to combat ballooning inflation. A resurgent US dollar could also hit metal prices hard. This is because gold et al are predominantly traded in dollars, meaning they become more expensive to buy when the greenback rises.
However, it’s my opinion that gold prices still have plenty of room for further gains. I’m not alone in my bullishness however. Goldman Sachs now thinks bullion prices will hit $2,500 per ounce by the end of the year. And analysts at TD Securities have suggested $3,000 is a realistic target too. So I think now remains a great time to buy precious metal stocks.