Trump Trade Fears Take Gold and Palladium Futures on a Wild Ride

(April 10, 2018 - by Luzi Ann Javier)

(Bloomberg) -- Donald Trump’s trade policies are breathing new life into precious metals.

Measures of 60-day historical volatility for gold and palladium futures climbed to the highest in about a year. Volatility in silver also increased. Prices were whipsawed last week as Trump administration officials tried to calm markets, while their boss warned of short-lived “pain” from a trade stand-off with China. In Russia, the largest palladium producer, dozens of companies and key allies of President Vladimir Putin are facing a new wave of U.S. sanctions.

Gold futures have gained more than 2 percent this year as Trump’s policies, including recent announcements on import tariffs, spur concerns that a trade war may erupt between China and the U.S., derailing global economic growth. On Monday, Trump again lashed out at China, saying the relative size of tariffs placed on American cars sold in the Asian nation “sounds like STUPID TRADE.”

Bullion futures for June delivery rose 0.3 percent to settle at $1,340.10 an ounce at 1:30 p.m. on the Comex in New York.

“Volatility has spiked all over the place,” Bart Melek, head of global commodity strategy at TD Securities, said in a telephone interview. Investors are pricing in a risk premium amid the uncertainty from Trump’s policies, he said.

United Co. Rusal, which controls about 28 percent of MMC Norilsk Nickel PJSC, was among the Russian companies included in the list that the U.S. hit with sanctions on Friday intended to punish the country for actions in Crimea, Ukraine and Syria, and for attempting to subvert Western democracies. Norilsk Nickel operates some of the richest mines in palladium, platinum, and nickel.

“I think there’s an element” of uncertainty in the flow of supply that’s being factored in palladium prices, Melek said.

Palladium futures for June delivery rose 4.2 percent to $932.50 an ounce on the New York Mercantile Exchange, the biggest gain for a most-active contract in seven months.