The chemical element Palladium (Pd) described as a shiny silvery-white metal was discovered in the year 1803 by the English chemist and physicist William Hyde Wollaston.
In 2001, centuries after its discovery, the price of Pd skyrocketed to US $1, 100 per troy ounce. This peak in January of 2001 was brought about by the demand from the automotive industry. Ford Motors and other car manufacturers at the time started utilizing Palladium for its catalytic converters instead of using its pricier relative Platinum. And because of this surge in the demand for Palladium, the price of the precious metal went up. By 2014, Palladium started selling for around less than US $3 of its highest price while other precious metals stumbled. Gold slipped 2% in the early part of May 2014 while Palladium, according to The Wall Street Journal went up 7 %.
Palladium as an investment is no different from investing on other precious metals such as silver and gold. And like many precious metals, this Platinum byproduct also has numerous industrial uses. There isn’t much talk about investing in Pd though, at least not yet. However, the industrial metal being a precious metal is valuable in the investment sense and much like Platinum and Gold, it has intrinsic value.
Palladium has many uses. It is used in the electronics industry as well as utilized in the field of healthcare. It is also used in groundwater treatment, jewelry, and plays an important role in fuel cells. While it is used in various industries, over 50% of the Palladium supply is used for catalytic converters or car exhaust filters, according to recent data.
But despite its usefulness, not many investors allot a certain budget to add Palladium into their portfolios. It is interesting to note though that Palladium and its relative Platinum have outperformed gold and silver in recent years. But it is also important to keep in mind that like other precious metals, Palladium has also experienced underperformance in the market. But does this mean that you should not include it in your portfolio? The short answer is no because you should get a bit of Palladium. After all, the precious metal has a lot of potential.
Palladium: Supply And Demand
Palladium is extremely rare. In fact, production of this precious metal is less than 10% that of gold. If one looks at this data alone, it means that Palladium should trade at significant prices or premiums. While we are using the word “should”, it does not mean that it will never happen in the real world because it already got a nice price tag per ounce back in 2001 and again a few years later.
There is a high demand for this precious metal and this tells us a lot. As of 2012, the demand for Palladium became larger than the supply. This is reason enough for Palladium’s price to go up in the near future.
The demand did not just experience a sudden surge though. This increase in demand was gradual as more industries started using the precious metal. In the year 1990, the demand for the precious metal was only at 100 tons. By the year 2000, demand went up to 300 tons. The United States Geological Survey says that the global production of the metal from the year 2006 was at 222 tons. There was a Palladium deficit that year.
Why should you invest in Palladium?
Palladium is not just important for industrial production and overall economic growth; buying Palladium as a hedge from inflation is a good idea. While there are other precious metals you can add to your portfolio, it won’t hurt if you get a bit of Palladium into the mix.
How can you invest in Palladium?
The best way to invest in this precious metal is through an ETF preferably one that holds physical bullion on behalf of its investors. If you are new to investing on precious metals, it would be best to consult with a broker immediately.
Should you buy Palladium now?
There are only a few things to remember when investing on precious metals. The first one is that many investors will abandon their precious metals when the global economy is doing well. If there is enough prosperity going around, investors do not find any need for a safe haven. Other investors on the other hand would sell their precious metals because there is no need for them to protect the wealth they have accumulated.
If you would like to get some precious metals for your portfolio, it is best to buy when there is not much interest in these metals. The second thing to remember is that it is better to think about the long term than making a quick buck. Other investors will advise against this but the continuous demand for Palladium will increase the production deficit. This will in turn make this particular metal more expensive.