- After Russian military struck Ukraine, gold futures soared 2.8 percent to a 13-month high of $1,965 on Thursday.
- Investors sought safe-haven assets such as silver, nickel, and other metals as global markets fell.
- Russia dominates the precious metals market, and if it retaliates against sanctions, prices could rise even more.
As Russian forces launched a comprehensive air and ground invasion against Ukraine, gold prices soared to their highest level in more than a year, while palladium prices soared.
As of 7 a.m. ET, gold futures were up 2.8 percent at $1,965 per ounce, the highest level since January 2021. In times of crisis, gold is considered as a "safe-haven" asset, and its increases coincided with investors fleeing risk and a drop in global stock markets.
Silver surged 3.2 percent to $25.32 per ounce, its best level since November last year, while nickel, palladium, and aluminium all saw significant gains.
On President Vladimir Putin's orders, Russia launched an early-morning attack on Ukraine, which Ukraine's foreign minister described as a "full-scale invasion." According to a Reuters storey, its armies marched on its neighbour by land, air, and sea in the largest invasion by one European state against another since World War II.
The safe-haven demand for gold, according to Saxo Bank strategist Ole Hansen, is balancing the negative impact of a rising dollar. He predicted that gold may hit $2,000 per ounce.
"As this conflict comes with even higher inflation as a consequence, gold and silver are expected to continue in demand, with bonds struggling to provide the traditional safe haven," Hansen wrote in a note.
"Moreover, central banks must balance rate hikes against an accelerated economic slowdown, and any reduction in the current 7 rate hike predictions will boost the metals even more," he added.
The 10-year Treasury note yield fell to 1.849 percent early Thursday, down from 1.997 percent the day before, while the dollar index rose 1.05 percent.
The US Federal Reserve is planning to raise interest rates in 2022 in an attempt to cool the country's soaring inflation. Sanctions on Russia may limit oil and gas supply, putting more pressure on inflation as a result of higher energy prices for consumers.
The United States and the United Kingdom have implemented penalties, and EU head Ursula von der Leyen threatened on Thursday to prevent Russia's access to crucial markets and technologies.
Russia is a major producer of nickel, a critical component in steel production, and aluminium, and prices for both metals have risen dramatically. Nickel rose 6.4 percent to $25,965 a tonne, the highest level in more than a decade, while aluminium rose 5.3 percent to $3,468 per tonne.
"An already tight aluminium and nickel market could become even tighter due to supply disruptions caused by sanctions and rising production costs due to higher energy input costs," Hansen added.
Russia dominates the precious metals trade, shipping 45.6 percent of the world's palladium, according to ADM Investor Services. It also produces 15.1 percent of the world's platinum and 9.2 percent of the world's gold, the brokerage found.
Palladium gained 6% to $2,604.52 per ounce on Thursday, bringing its year-to-date gain to more than 36%.
Further, tougher sanctions are now likely in the pipeline for Russia, , which might retaliate by halting the flow of palladium, a critical component in autocatalysts, according to Commerzbank analyst Daniel Briesemann.
"We anticipate punitive actions from Russia, including the suspension of vital commodity exports to Western countries. Palladium is one of the precious metals that is likely to be affected "he wrote in a note