Most players from the investors to the traders in the precious metal market focus on gold and silver, two of the safe haven metals that have traditionally been the most popular since ancient times. But such attention historically hasn’t been given to platinum and its sister metal, palladium. This can be attributed to many factors including the lesser industrial need for these metals and the lesser interest in them among investors.
Things change, fortunately, and palladium is finally getting the attention that it should get in the first place. In fact, the market discourse that usually comes with gold and silver is now also being applied in palladium! The main reason: Palladium has outperformed gold, silver and platinum in 2016 and it continues to do so in 2017, so far.
Let’s just say that, like for gold and silver, the price fluctuations for palladium are a combination of factors including investors’ personal sentiments about their values and their risk appetites. The law of supply and demand, as affected by government regulations and monetary policies, is also instrumental in their price directions.
Let’s also take a closer look at the pall being lifted, so to speak, over palladium investments.
Good News to Know
When the metals market opened in 2017, the palladium sector has experienced significant gains. In 13 January 2017, for example, the metal breached the $750/oz. barrier, a 10% gain since the trading began for the year. This is also notable because it’s a nearly 20% gain in comparison with last year’s prices, as well as the fact that it outperformed gold, silver and platinum.
Market analysts attribute such an impressive spike to many factors. First, palladium is used in petrol vehicles as automotive catalysts. Due partly to the scandals surrounding diesel vehicles, particularly those manufactured by Fiat Chrysler and Volkswagen, analysts predict that there will be an increase in the demand for petrol vehicles. In turn, the demand for palladium will likely increase because of its use in these cars.
Second, the United States and China appears to be increasing their production. This is perceived, right so, as beneficial to palladium because of its wide industrial uses, especially in chemicals processing and electronic products. The use by selected industries of palladium also makes it easier to predict its increased value, in contrast with gold and silver that have traditionally been directly influenced by the investors’ sentiments and risk appetite, as well as by the government’s monetary policy.
The bottom line: Now may be a great time to make your move on palladium!
Good Things to Know
But as with all types of investments, palladium investments shouldn’t be taken too lightly. For starters, you have to gain basic information about palladium so that you can make wiser choices. Your basic education will become the foundation for gaining more effective strategies in getting the most from your palladium investments, whether these are in exchange traded funds, futures, or stocks.
Rare precious metal
Palladium isn’t in the general public’s consciousness, unlike gold and silver, because it’s among the rarest precious metals on the planet. In fact, it’s approximately 30 times rarer than gold and 15 times rarer than platinum – and the latter is rare in itself! The rarity and the high cost of extraction of palladium contributes to its high prices.
There are only two countries where most of the palladium produced is mined – Russia with 41% of the world’s production and South Africa with 38%. The United States, Zimbabwe and Canada are also producers but in significantly smaller quantities. In the past decade, palladium supply has been in the deficit thus contributing to the spikes in prices.
More than 55% of the worldwide demand for palladium comes from the automobile industry mainly for its use in catalytic converters in petrol-fueled vehicles. The rest are used in dentistry, electronics, and fuel cells.
Options in investments
You can get on the palladium bandwagon in a few ways. Be sure to consider the pros and cons of each type of investment, especially in relation to your risk and reward criteria.
First, you can buy palladium bars and coins, which are suitable for small-scale investments. You may purchase palladium coins for as low as $50 as well as palladium wafers and bars, which are sold according to their weight and based on the spot price. You are well-advised to choose bullion coins because of their higher value in comparison with collective palladium coins.
Second, you can also trade in palladium futures. These are available in the Tokyo Commodities Exchange and the New York Mercantile Exchange, each one of which has its own minimum price fluctuation and contract size, among other aspects of operations.
Third, you should consider exchange traded funds (ETF). These are open-ended mutual funds that are backed by insured palladium bars. These physical palladium bars are insured and stored in safe locations.
Fourth, you may also buy the common stocks of palladium-producing companies. This isn’t a straightforward option despite appearances because most are also engaged in mining other metals and minerals.
Palladium investments can provide good returns on investments. Just remember that it is still a specialist metal with its prices closely tied to its industrial demand. You are well-advised to adopt a different mindset to it than with gold and silver.