Palladium928 USD/oz 9 (0.98%) (Last updated - January 18, 2024 07:41 AM UTC )
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January 18, 2024 07:41 AM UTCData Powered by Stockdio. Data delayed by 5 minutes unless otherwise indicated.
Palladium or Pd is a lustrous silvery-white metal that was originally discovered by William Hyde Wollaston in the year 1803. The metal was named after an asteroid, Pallas. Palladium is a part of the group of elements that are together referred to as platinum group metals (PGMs).
PGMs include Palladium, platinum, rhodium, ruthenium, iridium, and osmium. PGM group elements have similar chemical properties, but palladium is the lightest of them.
Palladium along with other PGM elements is sparsely distributed across the globe and is a rare find. Some of the largest deposits are found in the norite belt of South Africa, the Sudbury Basin and the Thunder Bay district in Canada, the Stillwater complex of the United States and the Norilsk Complex of the Russian Federation.
Most of Palladium’s global supply is utilised in catalytic converters. Catalytic converters can covert harmful gases such as nitrogen dioxide, carbon monoxide coming out of IC engines into harmless gaseous products. Both platinum and palladium are used in catalytic converters. Additionally, Palladium is also widely utilised in dentistry, pharma, alloys, catalysis, consumer electronics, water treatment, chemical industry, hydrogen purification technologies and jewellery. The valuable metal is also used in fuel cells that produce electricity, heat and water from hydrogen and oxygen.
Palladium as an investment
Palladium trades on the London Platinum and Palladium Market and the New York Mercantile Exchange (NYMEX). The London Platinum and Palladium Market is the largest over-the-counter marketplace for the metal.
Although the market size for palladium is significantly smaller in comparison to precious metals like gold and silver, the metal has seen a supply deficit with major fluctuations in the supply-demand gap in recent years.
Like other commodities, prices of palladium are driven by the demand and supply dynamics of the metal. Usually, Palladium prices are more volatile in comparison to gold, resulting in a less liquid market and higher risk associated with the investment. The London Metal Exchange sets the LBMA Palladium Price twice a day, once at 09:45 GMT and 14:00 GMT, and is used as a benchmark for plalladium’ss price.
Being a precious metal, Palladium is also considered by some investors to be a safe haven or inflation hedge like gold. However, it is not true in its entirety. While often a positive correlation is observed between palladium and gold prices over longer periods of time, in times of uncertainties, the price of palladium often decreases in relation to gold. A similar trend was observed during the great economic recession of 2008 establishing the metal as an industrial commodity rather than an investment commodity. The gold-to-palladium price ratio is used as an indicator of confidence amongst investors.
Palladium’s prices depend heavily on the automotive market, which depends largely on the nation’s economic situation and business activity. Both platinum and palladium prices are interdependent on each other’s prices and supply factors, including mine production, changes in palladium inventories and recycling. With supply constraints, palladium’s prices are prone to production stoppages. Furthermore, the burgeoning electric vehicle market and a secular downtrend in IC engine-powered vehicles may pose a risk for the palladium market as the metal is not used in electric vehicles.
ASX Palladium companies
Frequently Asked Questions
There are multiple ways to invest in palladium. Here are a few options–
Exchange Traded Funds (ETF) – Palladium-backed ETFs mimic the performance of the precious metal in a fashion similar to an index fund. ETFs can be traded like an equity instrument on an exchange.
Bullion: Another way is to buy physical assets directly in the form of bullion. Investors may choose to buy palladium bars or coins for their portfolio growth. While this option may not be the most liquid investment vehicle.
Equity: Another way to gain exposure to palladium could be through investing in palladium-focused businesses. One could invest in PGM mining companies to reap benefits of the price surge in the commodity.
Futures and Options: F&O markets offer investors an opportunity to invest in the metal. These instruments offer liquidity and also give leverage to investors who intend to make big investments in the metal.
Russia, South Africa and Canada are the biggest producers of palladium in the world. As per the data from the U.S. Geological Survey (USGS), palladium mining production in 2020 stood at 210,000 kgs, 7% lower than in 2019. Out of this, Russia produced over 91,000 kgs of mined metal while South Africa and Canada produced 70,000 and 20,000 kgs of the metal.
With a sparse distribution of the mineral across the globe, mining production and operations are mostly controlled by a few companies.
Every investment has its own set of risks. While one could analyse and predict market movements to some extent, these investments always carry some risks due to rapid fluctuations in commodity prices. The prices may drop significantly due to macroeconomic factors or technical imbalances in the market, for example, more sellers’ interest than buyers’ interest in the market or commodity demand and supply changes, and many other factors. While these sudden developments could deplete one’s wealth, they may also lead to substantial gains on the person’s investment.
Palladium acts as a catalyst in catalytic converters used to convert pollutants into less harmful substances via chemical reactions. Palladium catalyst could speed up chemical reactions without having any effect on the performance. Apart from palladium, platinum and rhodium are also used in catalytic converters.
For palladium catalyst in cars to work efficiently, it must be in physical contact with exhaust gases passing through the catalytic converter. Over a period of time, the efficiency of the catalyst can reduce due to coating by different materials over the catalyst’s surface. Hence, the catalyst needs to be replaced or cleaned periodically to ensure the efficient functioning of the system.