By Rhona O’Connell, Head of Market Analysis, EMEA & Asia, StoneX Financial Ltd | June 17, 2022

Welcome to our round-up of precious metals activity in May 2022 and a look at the context helping to influence market volumes – and vice versa. Gold volumes were, on average, up marginally in spot but down in all other areas, while silver posted improvements in spot and LoanLeaseDeposit (LLD) but losses in Swap/Forward and Options.

As we noted in last month’s note, in March, the LBMA suspended Good Delivery listing for gold and silver from six Russian refineries. The LPPM then announced on 8th April that certain Russian brands would be suspended. We will look at this in greater detail in the relevant sectors below, but as might have been expected, the volumes in palladium fell by a lot more than those in platinum and have kept on falling. In 2021 Russian palladium production accounted for roughly 38% of the world total, and for platinum, roughly 10%. The impact on the platinum and palladium market of the suspension of the Russian brands was palpable in May, with volumes very substantially down in all segments when compared with the previous twelve months, and although a straight comparison with May 2021 was also largely negative, it was not as deep as the full twelve-month comparison.  

Daily average trading volumes in May, compared with May 2021-April 2022


Gold started May quietly after its retreat in the second half of April from the test of $2,000, a small correction from $1,870 and then a failed month-end test of $1,900. An early renewed test of $1,900 was in very thin conditions, and, again, it failed. The subsequent retreat to just below $1,800 was in moderate spot volume but started with heavy volumes in swaps and forwards, suggesting stakeholders locking in prices as $1,900 was proving impenetrable. Interestingly there was strong action in the options markets as spot approached $1,900, and the subsequent reversal suggests that these may have been puts.

LBMA TD: XAU Total Vol

As we have seen so often before, the bounce from the $1,800 test developed in higher volumes as some positions were closed and others opened. This is consistent with anecdotal evidence of fresh bargain hunting below $1,800.

From a fundamental standpoint, this first half of the month was characterized yet again by markets’ focus on interest rates. The Federal Open Market Committee (FOMC) met at the start of the month and hiked rates by 50 basis points, although at the time, the signal was that 75 points were not on the cards for June. (In the event, of course, in June, the FOMC reacted to several data points and did hike by 75, with a view to front-loading and thus giving the Fed flexibility further out).  

In the pre-Volcker days, it was usual for inflationary forces or expectations to boost gold prices, but with monetary policy now in the markets’ crosshairs, a high April CPI number and a particularly strong PPI number signaling further inflationary pressures in the medium term, kept gold under pressure on the expectation of increased aggression from the FOMC. Conditions, meanwhile, were not much better on the other side of the Atlantic, and the European Central Bank had started alluding to likely interest rate rises sooner rather than later.

Gold in dollars and other major currencies, 2022 to date

Gold chart

Source: Bloomberg, StoneX

Bargain hunting on the approach to $1,800 helped to turn the tide and enjoyed increased participation across the board. Swaps/forwards were lively, suggesting some forward cover among market participants. 

The increase in LLD volume was also interesting, as that sector had been moribund for the first half of the month, suggesting limited central bank activity and low interest in loans. 

Since this was in an upturn, it is possible that some lending activity was wound up. Even so, LLD volumes over the month were just 41% of the average over the preceding twelve months.

The second half of the month saw gold prices consolidate in a $1,800-$1,875 range that persisted well into June as gold was being pulled in conflicting directions, in a classic case of “boring price, interesting market” with the well-rehearsed fundament factors of monetary policy and geopolitical risk largely in conflict. The physical market remained very sluggish, with major Chinese cities in lockdown and the falling rupee deterring interest in India. That said, it should be remembered that when physical grassroots interest is strong, it is normally only enough to cushion falls, not to independently drive gold prices higher.

For the first part of this period, volumes were lively, especially in the forwards, during which time gold had poked its nose over $1,850, which suggests that expectations were continually being revised downwards; and near month-end lively lending activity may have helped to push prices below $1,800, by which stage the spot market had turned even quieter. For May overall, swaps and forwards were down by just 4% from June 2021 – April 2022.

In the background, the lack of investor interest was reflected in the small (50t, or 1.3%) redemptions in the gold ETPs, with mixed net purchase and sales evenly spread across the different geographic regions, while Managed Money exposure on COMEX fluctuated more or less in line with price patterns.


The gold:silver ratio was again a clear indicator of the relationship between the two metals; in a bull phase, silver will outperform gold and vice versa in a bear move. Sure enough, this meant that as gold dropped to $1,800, so the gold:silver ratio ran up to 88 as silver eased to a low of $20.46 (intra-day basis). In the ensuing recovery, anemic though it was, the ratio slipped, but it remains at historically high levels above 83.

Silver fundamentals remain unprepossessing in that (prior to any investment activity) it is in a reasonably substantial surplus, and the nature of its production, with only 25% of total supply coming from primary silver mines, means that supply keeps on coming, regardless of the prevailing price (more on investment activity below). 

LBMA TD: XAG Total Vol

Silver, therefore, with gold not showing much intention to move smartly in either direction, kept to a narrow range of its own, with $20.46 as the low in mid-month. The high had been at the start of the month at just over $23.35, while in the second half of the month, it held to a remarkably narrow range between $21.28 and $22.24 – just 4.5%. The fundamental influences were essentially those that apply to gold, although economic uncertainty, which theoretically is supportive for gold, casts a cloud over silver.

Trading patterns were rather different, however. While gold was quiet in early May, silver was quite vibrant in spot, forwards and LLD before becoming much quieter in the second half of the month, the only exception being a very heavy day right at the end of the month in all three elements. In fact, for most of the month (apart from one very quiet day near month-end), the volume patterns between the two were almost mirror images of each other.  

It looks as if high silver volumes at the start of the month reflected the fact that silver was staging a correction in its bear run, possibly some optimistic bargain hunting, or more likely some shorts taking profits after the slide below $23, technical follow-through and then the reversion to the bear run. May as a whole saw spot volumes 7% higher than in the preceding twelve months, and LLD posted an 8% gain.  

Gold and silver year-to-date; misleadingly close short-term profile

Silver chart

Source: Bloomberg

The high spot volumes on the way down in the rest of the period suggest some participants are running for the exit, as silver’s volatility is well known. They were not matched by swaps/forwards, which suggests that stakeholders, equally cognisant of silver’s fickle nature, were sitting on their hands and awaiting a bounce.  

The bounce when it came was not especially compelling, but when silver had clambered over $22, there was a fresh interest in the forwards, bringing forth heavy spot, swap and LLD activity that set the scene for another subdued price performance in early June. Swap activity overall was down 9% against June-May, and options were down by 29%.

Meanwhile, there was some erosion in the Silver ETPs over the month, but holdings only dropped by 624t or just 2%. Money Managers on COMEX continued their liquidation before bargain hunting developed into the dip. Outright short positions continued over the month before some short covering at month-end as $22 approached.


Platinum’s spot volumes were 9% down on the preceding month, but in swap/forward, options and LLD, the declines were much sharper, at 25%, 45% and 41% in the face of uncertainty over the prospects for industrial recovery combined with the reduced supply into LPPM OTC from Russia (which is responsible, normally, for roughly 10% of world platinum supply.  

LBMA TD: XPT Total Vol

In the first two trading days of May, however, spot volumes were thin, at just 80% of the daily average volume in April. These thin conditions contributed to a smart uplift in prices, rising by 7% or $62 in just two days from $937 to $999. These two days, apart from a couple of very brief forays over $1,000 on the following day and then a week later, defined the full price range for the month. After a week of trading between $930 and $1,000, platinum’s second failure at $1,000 generated fresh heavy volume into the reversal that sent the price back to $940 and set the scene for narrow ranges for the rest of the month.

Spot platinum, January 2021 to early June 2022 and its correlation with palladium

Platinum chart

Source: Bloomberg

In this comparatively volatile first fortnight, activity was reasonably high, posting volumes some 15% higher than in April and LLD was up by 38%. The former suggests some forward buying from the demand side, and there had been some anecdotal evidence of industrial interest early in the month (it has been suggested that there may be a resumption in the Chinese glass industry following postponements last year) and the activity in LLD suggests leasing activity in those existing plants that need to borrow metal while their spent in-process components (catalysts, baths, bushings, etc. in chemical, petrochemical and glass industries) are changed out and recycled.

As prices consolidated in the latter half of the year, trading activity fell away also, especially in spot, while derivative activity picked up slightly towards month-end as prices edged higher, laying the foundations for fresh wide moves in early June – in both directions.

In the ETPs, most of the month saw light redemptions, with a loss of two tonnes (1.9%) over the month, while Managed Money positions contracted on both sides of the market, but with long liquidation outweighing short covering. The net position remained short over the month before heavy short covering started in early June.


Although it is widely believed that Russian palladium is finding its way to industrial consumers, the routes obviously do not include LPPM OTC markets, and this was abundantly clear in the volume figures for May. Spot was down 30% against the previous twelve months, while the declines for swap/forwards, options and LLD were down 40%, 48% and 58%, respectively.

LBMA TD: XPD Total Vol

In terms of price, the pattern was more closely akin to gold and silver than to platinum, with palladium slithering lower through to the 12th, continuing the bear market that kicked in during the first week of March. The second half of May saw palladium hold to a very tight range centered on $2,000 before further declines set in around mid-June.

The market continued to concentrate on the state of the auto sector; there had been some suggestion that the dislocation in supply chains was easing, but opinions did vary on this issue, and it does seem to be increasingly clear that these conditions could drag on through much of next year. The situation is exacerbated by the fact that Ukraine is responsible for 50% of the world’s neon supply and neon is a critical element in the laser engraving of semiconductor chips. There were some signs of industrial interest in North America, with the premium for sponge (the primary raw material for industrial use) reaching $30 at one point before easing again, while the nearby forward months have remained flat, reflecting tightness and the forwards have been volatile.

In terms of trading volumes, the major activity in spot came in the first half of the month as the market suffered under some long liquidation and what looked like some nervous forward selling as prices slipped towards $2,000. Conditions then became much quieter, with no real activity in either direction as spot clung close to $2,000. There was some sporadic activity in swaps and forwards in the final days, largely on “up” days just above $2,000, which may also suggest some industrial interest on a forward basis, while there could well also have been some forward selling on any approach to $2,100, which put up increasing resistance as the final weeks developed.

Finally, on the last day of May, volumes picked up very smartly in all areas, even including some punchy option activity, after palladium had got as far as $2,095, and we closed on $2,002 before slipping slightly in the first part of June.

Spot palladium and the ratio with platinum, year-to-mid-June

Spot palladium and the ratio with platinum, year-to-mid-June

Source: Bloomberg

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Source: Nasdaq


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