Palladium

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.

Applications

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.