How Will Russia’s Invasion Impact Gold and Silver?

This episode of ‘Live from the Vault’ looks at the ongoing geopolitical escalation between Russia and Ukraine, analyses the effects of that conflict on the wholesale global market and explains the connection between the gold and silver price movement, with both seeing huge demand and acting as a safe haven for investors.

In particular, the life-long wholesaler Andrew Maguire focuses investors’ attention on the important battle between the paper gold market and Basel III-triggered physical drivers and compares how the world’s sanctions will be felt in Europe and the United States of America.

Bullish development for physical gold

The geopolitical escalation has significantly impacted the gold and silver market. We have seen rising prices and investors evidencing both the physical demand and ETF inflows. Notable physical gold and silver demand is consistently evidenced among sovereign institutional-sized buyers, who seem to be stocking up en masse as the Basel III gold compliance window closes. It is now clear that more banks and institutions are moving towards adoption of the NSFR rules, that came into effect last June, and are unwinding their paper physical gold positions accordingly.

The US and Europe in the light of geopolitical events

Although the economic setbacks of the Russia and Ukraine conflict seem to be a predominantly European problem, considering the US is to a great extent isolated from the emerging migrant and energy crisis that we are seeing unfold across Europe, the situation affects the wholesale precious metals market on a global level.

The recent geopolitical escalation is widening the divide between the paper and physical markets, with paper diluting the gold price as the physical gold market is still discovering it.

It seems that the current bearish bets churning inside the SLV and GLD Exchange Traded Funds have most likely emerged as a result of the current geopolitical situation. Although, with such a strong sovereign demand for physical gold and silver that will kick in, investors may be provided with enough ingredients for another rally to unfold in the coming months.