If you thought platinum was rare, think again. Palladium is approximately 30 times rarer than gold and 15 times rarer than platinum. Palladium belongs to the platinum family of metals and like other metals, palladium can also be traded as a financial asset.
Palladium is mostly produced in two countries, namely Russia and South Africa. As a result, if you’re going to invest in this precious commodity, you’ll need to follow what goes on in these countries that may affect your investment.
Russia accounts for almost half of the global palladium production. As a result, any decrease in exports from either country can make the market highly volatile.
It’s a good investment channel as the demand for this precious metal won’t die out anytime soon. In fact, it’s unique composition makes it suitable for the following industries:
Out of all these, the auto industry uses the most amount of palladium. This commodity is used in catalytic converters and this is what’s driving demand.
Unlike corporate stocks, commodities are driven by supply and demand. With Russia controlling 50% and South Africa controlling about 30% of the supply, it can make the price highly volatile.
Further, demand has also added to the volatility as China’s booming auto industry can put a strain on supplies. No one knows how much Russia has stockpiled over the years, so we will have to wait and see what happens in the future when resources start running out.
As an investment channel, there are many ways for an investor to get exposed to the commodity. The options range from palladium futures, physical palladium, and palladium exchange-traded funds (ETFs) or palladium miners.
As miners are for the most part mining a variety of other metals, palladium is only going to make up a tiny portion of the miners output. However, there are a few pure play mining companies that are ideal for an investor wanting to invest in palladium.
Palladium ETFs and ETFS Physical Palladium Shares hold physical palladium and move in tandem with market prices. Further, palladium futures are a great way to gain exposure to this metal. It’s traded on the New York Mercantile Exchange (NYMEX) and is usually available for over 15 months.
The bottom line here is that it’s not as popular as other metals like platinum and it’s also cheaper. But as its demand grows because of the auto industry, the price should increase in tandem. As a result, it can be highly attractive to investors.