Is Palladium a Good Investment?

When people think of investing in precious metals, they automatically think of gold, silver, and platinum. There is, however, a metal that’s over 30 times rarer than gold and much more valuable: palladium. It sits next to rhodium and silver on the periodic table and shares many of the same properties.

Because palladium is a relatively new player in the precious metals space, many people are wondering whether it’s just a fad. So, is palladium a good investment?

Palladium is Very Useful

Palladium is a strong metal characterized by its lustrous white color and has many industrial and cosmetic applications. When used to make jewelry, palladium is typically alloyed with pure gold to create white gold, a precious material found in today’s wedding rings, necklaces, and heirlooms. Most of the palladium in the world, however, goes to the manufacturing of catalytic converters and other parts of exhaust systems, as it can be utilized to convert harmful pollutants into water vapor and carbon dioxide.

In Dentistry

Palladium is also used as a component in many dental fixtures such as fillings, crowns, and bridges. It used to be that mercury-based materials were the only option available for cavity fillings. Over time, dentists have developed procedures that require more radical and longer-lasting solutions.

Palladium is highly resistant to corrosion from substances that pass through a person’s mouth, and when alloyed it is also resistant to tarnishing and discoloration. Up until recently, palladium was considered an economic choice, offering a larger ounce-per-dollar ratio compared with platinum and gold. Recent supply shortages have changed the story, as palladium has now risen to a value that’s nearly 10% higher than gold.

In Cars and Electronics

In electronics, palladium is used to make ceramic capacitors which are found in the motherboards of laptop computers and the circuit boards of mobile phones.

Its value and rarity in the manufacturing industry are increasing because of the rising demand for bigger and better cars that put out fewer emissions. Car manufacturers from the United States and China use palladium for mass production, while carmakers from Europe still use platinum, which is an equally effective but less economic strategy.

Palladium primarily comes from South Africa and Russia. Yet mines looking for palladium exclusively are few and far between, as it is commonly produced as a byproduct when mining for platinum and nickel.

The Rising Value of Palladium

The world is making a push for greener, cleaner ways of thinking that demand reduced emissions and higher fuel efficiencies from modern cars. With solar-powered hybrid vehicles still in the distant future, palladium and platinum are the two most viable options for achieving that today. China has an infamous smog that hangs over its largest cities, and the CPP is doing everything it can to cut down on emissions by tightening regulations.

New World, New Problems

Chinese and Southeast Asian automakers have been making great strides in the industry. Jaguar and Land Rover, which were once proud emblems for the British car industry, are now owned by Tata Motors, a company based in India. China is taking over the bulk of automotive manufacturing as Chevrolet and GM are moving their production centers offshore.

Carmakers from Asia are beginning to adopt a less cavalier attitude when it comes to controlling pollution, so the demand for palladium has risen off the charts. Europeans are also buying fewer diesel-powered vehicles, and some argue that diesel engines are on their way out. Gasoline-powered vehicles with palladium catalytic converters are the order of the day because of their unparalleled ability to separate nitrogen oxide molecules and convert them into harmless nitrogen and oxygen gases.

Supply is Growing Tighter

The rising value of palladium is not driven by investor speculation but by the laws of supply and demand. It is estimated that since 2012, a total deficit of over 5 million palladium ounces has placed increased pressures on the market to hunt for more available stores of palladium.

Given that most of the palladium in the world comes from South Africa and Russia, everything is hanging on a tight rope, but all signs point to a rise in the value of palladium. South Africa has many labor rights issues, strikes, and unfavorable working conditions. Russia, for its part, is quite secretive about its palladium stores, but the evidence available to the market is slowly suggesting that its stores are declining.

The rarer palladium becomes, the higher its prices will be. Palladium supply is growing tighter not only because of the unstable environments from which it’s mined, but also because of its manufacturing process. Palladium is a byproduct of nickel and platinum production. Output tends to rally behind price gains, and in 2019 the production of palladium fell short of demand for the eighth consecutive year.

Many Precious Metals are Volatile

Unlike gold, which has more or less maintained a steady value in the metals market since it was first priced, palladium and platinum have soared in value as their usage in vehicles becomes more and more popular.

When governments around the world began clamping down on pollution in 1998, platinum soared in value by over 500% and its increasing rarity caught the eye of many prospecting buyers and investors. Rhodium followed the same story, achieving over 4000% of its original value before auto manufacturers developed production techniques to phase it out.

The good news is that internal combustion engines continue to be the popular choice the world over.

BloombergNEF reports that vehicles with palladium catalytic converters will fly off the production line until they’re inevitably replaced by hybrid and plug-in vehicles sometime in 2040. As regulations on emissions become stricter across the world, palladium and platinum demand will rise and their prices will follow.

Palladium is already seen as a more economical alternative to platinum, but with its constant shortages, automotive manufacturers might start looking for alternatives. As of today, no other elements can be synthesized to achieve the same effect palladium has on nitrogen oxide, and its vast utility in electronics, jewelry, and dentistry ensures its present value as an investment.

How to Invest in Palladium

Invest in ETFs

ETFs, or exchange-traded funds, are a well-respected instrument in the financial industry. You can invest in palladium-backed ETFs and watch their value rise or fall, similar to how you would track any index fund. The top two most popular palladium ETFs are:

• Aberdeen Standard Physical Palladium Shares (Ticker: PALL)
• Sprott Physical Platinum and Palladium Trust (Ticker: SPPP)

The Sprott Physical Platinum and Palladium Trust allow investors to buy, hold, and sell assets in the form of platinum and palladium bullion. The trust is held by a corporation owned and operated by the federal arm of the Canadian government. As of this writing, it holds about 21,627 ounces of platinum and 39,065 ounces of palladium.

Aberdeen Standard Physical Palladium Shares was created to reflect and track the prices of palladium the world over without the hassle of computing for expenses. Today, its palladium reserves are stored at a vault in London belonging to JPMorgan Chase & Co., holding over 130,000 ounces.

Invest in Bullion

You can own palladium directly by buying palladium bullion bars, coins, and jewelry. This is a great way to invest because you can be sure that nothing will touch your investment as long as you keep it safe. The value of these collectibles will rise with the market, and you can sell them online or to a reliable jeweler when it’s time to cash in.

Palladium wafers and bars are not always easy to find, but it’s important to resist the temptation of ordering online and paying for the product without seeing it person. Purity marks can be faked, and the weight of bars and wafers can be inflated by adding other metals.

Invest in Palladium Stocks

Finally, you can own palladium by investing in businesses that are focused on its production. This method requires hours of study and consideration because many of the world’s palladium companies conduct their operations in countries that produce platinum. As a consequence, you will be exposed to both the price volatility of platinum and palladium and some mines may close if platinum stops being practical.

Even though palladium mines are only found in Russia and South Africa, two North American companies also mine palladium:

• Sibanye-Stillwater, listed on the New York Stock Exchange as SBGL
• North American Palladium, listed on the Toronto Stock Exchange as PDL

Some other companies listed on the Toronto Stock Exchange have great exposures to platinum, palladium, and other precious metals:

• Grid Metals (GRDM), which has a significant investment in the East Bull Lake palladium mine in Canada
• Ivanhoe Mines (IVN), the main developer of the Platreef palladium and platinum project in South Africa
• New Age Metals (NAM), the main developer of the River Valley Platinum Group Metals Project in Canada
• Nickel Creek Platinum (NCP), which owns the North American Nickel Shäw polymetallic project in the Yukon region of Canada

Invest in Palladium the Right Way

Oxford Gold Group is an American company based in Los Angeles, California. They have an A+ rating with the Better Business Bureau and a five-star Google customer rating.

Diversify your precious metals portfolio by buying certified Stillwater certified palladium bars and coins today. Dial 833-600-4653 and solidify your retirement savings by investing in gold, silver, and palladium the right way.