Palladium Investing 101: Comprehensive Breakdown

Of all the precious metals that you can invest in, palladium is by far the most interest.

We talk a lot about palladium investing on this website since it is obviously one of the precious metals that many choose to hold in a precious metal IRA.

So, in this article we are going to cover every aspect of palladium from what it is, what affects it’s price, ways you can invest in it, and a lot more.

Quick Disclaimer:

The content provided in this article is for informational purposes only and should not be considered financial or investment advice. Always consult with a qualified financial advisor before making any decisions regarding Precious Metals, Investing, or IRAs. Additionally, this article contains affiliate links, and I may earn a commission if you make a purchase through these links, at no additional cost to you.

Another question, I have been asked is, “What Gold IRA companies are the best” or “Which IRA companies are the most trusted?”.

If you’d like more information, below is a link to a comparison PDF by Augusta Precious Metals that could be useful. (It’s also free.)

Augusta Gold IRA Company Integrity Checklist

What is Palladium?

Palladium is a precious metal that belongs to the platinum group of metals.

It is known for its shiny, silvery appearance and remarkable properties.

Palladium is 30 times rarer than gold, making it one of the rarest precious metals available.

In 2021, approximately 200 metric tons of palladium were mined worldwide, with major production coming from countries like Canada, Russia, South Africa, and the United States (U.S. Money Reserve).

Palladium has seen a significant rise in value, increasing by over 400% since 2010.

This strong price performance has outpaced other precious metals like gold and silver, making it an attractive option for investors looking to diversify their wealth.

Uses of Palladium

Palladium is utilized in various industrial applications, making it a versatile and valuable metal. Here are some of its primary uses:

1. Automotive Industry: Approximately 85% of the world’s palladium supply is used in catalytic converters. These devices are essential for reducing harmful emissions in vehicles, particularly in North America and China.
2. Electronics: Palladium is used in the production of electronic components, such as capacitors and connectors, due to its excellent conductivity and resistance to corrosion.
3. Dentistry and Medicine: Palladium is used in dental alloys and medical devices because of its biocompatibility and resistance to wear and tarnish.
4. Chemical Applications: Palladium serves as a catalyst in various chemical reactions, including hydrogenation and dehydrogenation processes.
5. Jewelry: Palladium is also used in fine jewelry, often as an alloy with gold to create white gold, due to its bright, silver-like appearance and hypoallergenic properties.
6. Groundwater Treatment: Palladium is utilized in environmental applications, such as groundwater treatment, to remove contaminants and purify water.

For more information on investing in other precious metals, check out our articles on gold investing and silver investing.

By exploring the market trends and considering its high demand and limited supply, you can make informed decisions when adding palladium to your investment portfolio.

Market Trends

Price Surges

If you’re considering palladium investing, understanding its price trends is essential.

Palladium has experienced remarkable price surges in recent years, tripling in price between 2016 and 2020.

This surge was primarily driven by robust automobile demand and limited supply.

Prices did show significant spikes, especially in early 2020 and 2022.

Although the current price remains lower than its all-time high, it continues to increase yearly (U.S. Money Reserve).

However, it’s important to note that palladium’s performance can be volatile.

For instance, while gold saw modest gains of about 3% in 2022, palladium’s performance was sharply negative, indicating significant volatility (APMEX).

Automotive Demand

The automotive industry’s demand for palladium is one of the primary factors driving up its prices.

Palladium is crucial for manufacturing catalytic converters, which help reduce harmful emissions from vehicles.

Approximately 85% of the world’s palladium supply is used in these converters, especially in vehicles produced in North America and China (U.S. Money Reserve).

As clean air standards become stricter, the demand for palladium in catalytic converters continues to rise.

This demand is further bolstered by the shift towards electric vehicles, which also use palladium in their components (U.S. Money Reserve).

If you’re looking to diversify your wealth, understanding this demand can help you make informed decisions about investing in palladium.

For more insights on investing in precious metals, check out our article on precious metals investing.

Investing Options

When considering palladium investing, you have two primary options: physical palladium and palladium ETFs.

Each option has its own set of benefits and considerations.

Below, we explore these options to help you make an informed decision.

Physical Palladium

Investing in physical palladium involves purchasing the actual metal in the form of bars, coins, or other tangible assets.

This option allows you to own a real, physical piece of palladium, which you can store in a safe or a specialized storage facility.

Advantages of Physical Palladium:

• Tangible Asset: You own the physical metal, which can be a comforting and tangible addition to your investment portfolio.
• No Counterparty Risk: Physical assets do not rely on third-party entities, reducing the risk associated with market intermediaries.

Considerations:

• Storage and Security: Physical ownership requires secure storage, which can incur additional costs.
• Liquidity: Selling physical palladium may take longer compared to financial instruments like ETFs.

For those interested in other physical precious metals, consider investing in physical gold or investing in physical silver.

Palladium ETFs

Palladium ETFs (Exchange-Traded Funds) provide a way to gain exposure to the palladium market without the need to own physical metal.

These financial instruments track the price of palladium and can be traded on stock exchanges.

One popular example is the PALL ETF, which has outperformed the S&P 500 by 86% over the past five years and has an expense ratio of 0.6% (Publish What You Pay).

Advantages of Palladium ETFs:

• Cost-Effective: ETFs eliminate the need for physical storage and security, reducing associated costs.
• Liquidity: ETFs are easily tradable on stock exchanges, offering higher liquidity compared to physical assets.
• Diversification: ETFs provide exposure to the palladium market, which is primarily driven by the automotive industry, making them an attractive option for portfolio diversification.

Considerations:

• Market Volatility: Palladium ETFs are subject to market volatility, influenced by factors such as economic changes, Federal Reserve policy, investor demand, mining supply, and inflation.
• Management Fees: ETFs come with expense ratios, which can affect your overall returns.

For more information on ETFs, you can explore our articles on investing in precious metal ETFs and precious metals investing.

By understanding the different investing options, you can choose the one that best aligns with your investment goals and risk tolerance.

Whether you opt for physical palladium or palladium ETFs, both offer unique benefits for diversifying your wealth in the precious metals market.

For further reading on similar investment opportunities, check out our guides on platinum investing and gold investing.

Advantages

High Demand

Palladium’s demand is primarily driven by its extensive use in the automotive industry.

Over 80% of palladium is utilized by automobile manufacturers, particularly in catalytic converters, which help reduce harmful emissions (APMEX).

This strong connection to the automotive sector means that as the demand for vehicles increases, so does the demand for palladium.

The price performance of palladium has been remarkable, increasing by over 400% since 2010 and outperforming other precious metals like gold and silver.

This significant price surge highlights the robust demand for this metal, making it an attractive investment option.

Limited Supply

Palladium is 30 times rarer than gold, with only about 200 metric tons mined worldwide in 2021 (U.S. Money Reserve).

The major producers of palladium include Canada, Russia, South Africa, and the United States.

This limited supply adds to its value and makes it a precious commodity in the investment market.

The scarcity of palladium, combined with its high demand, creates a favorable supply-demand dynamic for investors.

As the availability of palladium remains constrained, its value is likely to remain strong, making it a worthwhile addition to your investment portfolio.

If you’re interested in exploring other precious metals, you might also want to read about gold investing and silver investing.

Diversifying your investments across different precious metals can help you balance risk and reward more effectively.

For more insights on precious metals investing, be sure to explore our other resources.

Risks

Market Volatility

Market volatility is one of the primary risks associated with palladium investing.

The price of palladium is influenced by various factors including economic changes, Federal Reserve policy, investor demand, mining supply, and inflation.

These factors can cause significant fluctuations in palladium prices, impacting the value of your investment.

Investors must understand that these fluctuations can lead to substantial gains or losses.

For instance, palladium ETFs are subject to market risks, including volatility in palladium prices, which can lead to significant fluctuations in ETF values (Publish What You Pay).

Therefore, careful risk assessment is essential.

Industrial Demand

Another significant risk in palladium investing is the reliance on industrial demand.

Approximately 85% of the world’s palladium supply is used in catalytic converters, primarily in vehicles produced in North America and China, to reduce harmful emissions.

This heavy reliance on the automotive industry makes palladium highly susceptible to changes in industrial demand.

Factors such as advancements in technology, changes in environmental regulations, and shifts in consumer preferences (e.g., the move towards electric vehicles) can significantly impact the demand for palladium.

For example, the shift to electric vehicles, which do not require catalytic converters, could reduce the demand for palladium, affecting its price and your investment returns.

Investors must stay informed about industry trends and regulatory changes to manage this risk effectively.

For more insights on the future prospects and how they impact your investments, check our articles on future prospects and market trends.

Whether you choose to invest in physical palladium or palladium ETFs, being aware of market volatility and industrial demand will help you navigate the complexities of the palladium market.

Future Prospects

Environmental Regulations

Stricter environmental regulations worldwide are driving up the demand for palladium.

This precious metal is crucial in the production of catalytic converters, which help reduce harmful emissions from vehicles.

As clean air standards become stricter, the automotive industry’s reliance on palladium increases.

According to economist Edward Gardner, palladium prices are expected to remain historically high through 2023–24 due to dwindling usable stocks and growing industrial demand.

This makes palladium a potentially lucrative investment, especially if you are looking to hedge against inflation (FasterCapital).

For those interested in diversifying their portfolio, exploring other metals like platinum or gold can also be beneficial.

Shift to Electric Vehicles

While the demand for palladium is currently strong due to its use in conventional vehicles, the rise of electric vehicles (EVs) poses a long-term challenge.

EVs do not require catalytic converters, which could reduce the demand for palladium in the future.

However, the transition to EVs is gradual, and palladium will continue to play a vital role in the automotive industry for years to come.

In the meantime, palladium’s use in hybrid vehicles and other industrial applications will sustain its demand.

To stay updated on market trends, visit our section on precious metal market trends.

For more on diversifying your investments, check out our articles on investing in silver coins and investing in rare coins.