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00:00[CC may contain inaccuracies] To gold up to record highs and palladium just smashing records the thing is how far do they go and what really is driving it. I mean we know it's a geopolitical search for a haven. But how long can that go on for. We can see the longer term relationship for gold remaining intact and that's its correlation with real yields. And when we see a short term and safe haven big driving gold it tends to be short lived. Just carry on with your answer about what the drivers are in the sense of that that sense of looking for a haven and how long it does go on for. We have seen gold prices rallying on the back of a geopolitical risk premium and that is really push gold prices above nineteen hundred and closing in on the all time highs. And when we've seen a sell off in the prices but whether it's come back a profit taking. Prices have been quite well supported. So any price steps have been viewed as a as a buying opportunity. So we generally tend to see that as geopolitical risk premium is short lived in the market and it tends to be a fleeting move higher. But when it starts to change as if we start see a structural shift in the market in terms of longer term investment demands and what we've seen on the back of the geopolitical risks is that now commodity prices across the board sometimes testing multi-year highs all time highs alongside more supply chain challenges and concerns that we could see inflation persisting for a longer period of time. Much more elevated level starts to drive the inflation bathing gold as well. So initially this move higher was being driven by tactical interest in the market. We started seeing tax positioning back at levels that we saw in 2020. But now is slowly starting to see some that ETF interest coming back into the market for March. For month to date inflows are already up around by 80 tons and then for the year today we're off over 150 tons. To put that into perspective that's more than 90 percent of the outflows that we saw for the whole of 2021. So yes normally we tend to see a move higher in gold prices being short lived when it comes to geopolitical risk when that has a knock on effect. And in terms of inflation risk that tends to overshadow REITs hike expectations. And we could start to see that interest in gold being reignited and investors re-evaluating what gold gold has to play within a portfolio whether it's for insurance diversification or given the heightened geopolitical tensions at the moment. All eyes on the Fed meeting next week. Jerome Powell expected to raise rates. What is Sumption. Are you making attempts far. Fat rates trajectory. How will that impact the movements of gold. So we're expecting the Fed to increase rates by 25 basis points at the March meeting and then we think for the next three meetings consecutive meetings will continue to the Fed increasing rates by 25 basis points at each of the meetings with the rates higher by 100 basis points by the end of the year. We do think that they'll pause in the second talks get as the effects of the interest rate hikes takes effect. The gold market in particular we tend to see that investors price in the the scope for rate hikes early on. So we tend to see a move in positioning and move lower in prices ahead of a potential rate hike. So while gold is still taking its cues from real yields the correlation is still at 60 percent the highest it's been in over a year. The fact that there were more concerns about inflation risks and concerns about heightened geopolitical tensions has actually offset the concerns of potential rate hike and it's continued to push gold prices higher. So we believe we're likely to see gold prices continue to extend their gains. It's not unusual for gold prices to edge higher off the right type. In fact we can see the most most the downside risk for the potential rate hike. But we think the concerns around inflation and longer term inflation risks and I'd like to actually see gold prices continue to move higher through the second quarter of this year as we see those rate hikes. Now in contrast to gold the move higher and palladium has not been driven on a flight to safety that's been more of an impact on its supply and demand balance and the fact that almost 40 percent of the world's supply of palladium is potentially at risk if there's any supply disruptions that could types in the market that we forecast to already be in deficit. Suki Palladium is very very interesting given Russia being the major player that you see the thing is that while the West tries to strangle the Russian economy Russia is not powerless in this. They can. As the world's biggest commodities exporter they have a huge amount of clout to hurt the rest of the world. If we look at Russia's palladium production yes it's found that 40 percent of the world's supply and most auto catalyst will do some combination of play and platinum and rhodium as well. 85 percent supply demand is driven by the auto market. But in terms of Russia's GDP it makes it less than 1 percent of its total GDP. But its geopolitical impact is far greater than what its share of GDP indicates for the palladium market. We can see that this other countries that produce a significant amounts. I mean look and consumers can see that most countries imported most of their palladium from Russia fought for the US for instance. They imported one point seven million ounces last year and run about 39 percent of that came from Russia. So we could see some of Russia's production being consumed by other countries. But at the moment small countries such as North America the demand for palladium is in excess of 2 million ounces whereas Russia produces two and a half million ounces. Suki we know that you don't quite Covid NIKKEI but it's been a phenomenal ride surging past one hundred thousand bucks. I'm just wondering how are you reading such movements in the commodities market. We've seen a great deal of volatility across the entire space in fact gold has been at the mercy of of headlines around the ISE Russia's invasion of Ukraine and we've seen the geopolitical tensions either setting prices higher and or quickly coming off. So across the commodity space it's commodities that are likely to be undersupplied or those with low inventories that are most at risk when remaining volatile. So palladium for instance is a market where inventories are incredibly low. The ETF holdings or in excess of three and a half million ounces and now less than 500000 ounces whereas the inventories are below hundred thousand that. So it's these commodities where inventories are low. We're looking at markets that are in deficit markets that are likely to be most impacted and have yes the most upside risk but also those that have the scope to be the most volatile.

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Gold Prices to Keep Rising Through Second Quarter: Standard Chartered

Suki Cooper, executive director, precious metals research at Standard Chartered Bank, discusses the outlook for commodities including gold and palladium. Gold headed for a second weekly advance, trading just below $2,000 an ounce, as the war in Ukraine and decades-high U.S. inflation lured a flood of investment into bullion-backed exchange traded funds. Cooper speaks with Rishaad Salamat and Haslinda Amin on "Bloomberg Markets: Asia." (Source: Bloomberg)

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