- Gold futures jumped 2.8% to a 13-month high of $1,965 on Thursday after Russian forces attacked Ukraine.
- Silver, nickel and other metals gained as investors sought out safe-haven assets while global stocks tumbled.
- Russia dominates the precious metals trade, and more rises could come if it retaliates to sanctions.
Gold prices jumped Thursday to reach their highest level in more than a year, and palladium surged, as Russian forces attacked Ukraine in an extensive air and ground offensive.
Gold futures were up 2.8% at $1,965 per ounce, their highest level since January 2021, as of 7 a.m. ET. The precious metal is seen as a "safe-haven" asset in times of crisis, and its gains came as investors fled risk and as global stocks slumped.
Elsewhere in metals, silver rose 3.2% to $25.32 per ounce, its highest level since November last year, while nickel, palladium and aluminum also rose sharply.
Russia attacked Ukraine early Thursday morning on the orders of President Vladimir Putin, in what Ukraine's foreign minister called a "full-scale invasion." Its forces advanced on its neighbor by land, air and sea in the biggest attack by one European state against another since World War II, according to a Reuters report.
Saxo Bank strategist Ole Hansen said the safe-haven demand for gold is offsetting the negative impact of a stronger dollar. He said gold could reach $2,000 per ounce.
"Gold and silver are likely to remain in demand, with bonds struggling to provide the usual safe haven, as this conflict comes with even higher inflation as a product," Hansen said in a note.
"In addition, central banks must balance rate hikes against an accelerated economic slowdown, and any lowering of the current 7 rate hike expectations will further support the metals," he added.
The yield on the US 10-year Treasury note fell to 1.849% early Thursday, from 1.997% Wednesday, while the dollar index gained 1.05%.
The US Federal Reserve is preparing to increase interest rates in 2022, to try to tame red-hot inflation levels. Sanctions against Russia may restrict supply of oil and gas, and the knock-on rises in energy prices for consumers would put on more inflation pressure.
The US and the UK have imposed sanctions, and EU leader Ursula von der Leyen on Thursday promised to block Russia's access to markets and technologies that are key to its economy.
Russia is one of the largest producers of nickel — a key component in steel-making — and aluminum, and prices for both metals rose sharply. Nickel was up 6.4% at $25,965 a tonne, its highest level in over a decade, while aluminum moved up 5.3% to $3,468 per tonne.
"An already tight aluminium and nickel market could get even tighter on supply disruptions due to sanctions and due to soaring cost of production through higher input cost from energy," Hansen said.
Russia dominates the precious metals trade, exporting 45.6% of the world's palladium, according to ADM Investor Services. It is also the source of 15.1% of the world's platinum, and 9.2% of the world's gold, the brokerage found.
Palladium rose 6% to $2,604.52 per ounce on Thursday, and extended its year-to-date gain to above 36%.
Further, tougher sanctions are now likely in the pipeline for Russia, which could hit back by stopping the flow of palladium, a key component in autocatalysts, according to Commerzbank analyst Daniel Briesemann.
"We expect Russia to respond with retaliatory measures, which could include suspending exports of key commodities to Western countries. One of the precious metals likely to be affected is palladium," he said in a note.