Investing In Palladium: Is Palladium a Good Investment?
The most famous precious metals to invest in are gold and silver, but there is an even rarer precious metal on the market: palladium.
Palladium’s spot price per troy ounce is roughly $2,000 per troy ounce but is down 5.5% over the past 30 days. This is mainly over concerns that Russia, one of the top suppliers of the metal, will be impacted by its ongoing war against Ukraine. It's also due to several other factors including supply-chain disruptions and lack of investment in palladium mining projects.
Palladium is element number 46 on the Periodic Table, and is closely related to platinum.
Despite the price drop, palladium is still more expensive than gold, which is priced at roughly $1,800 per ounce. Why is palladium considered one of the most valuable precious metals on the market? There are many opportunities that allow palladium to increase in value over time, which could make it a profitable investment opportunity for you.
What is Palladium?
Palladium is a rare, silver-colored precious metal and falls under the commodity category. It is often referred to as white gold because of its unique features and makeup. Palladium is used in industrial manufacturing, in catalytic converters for cars, and in jewelry.
This precious metal is valuable because it is used in the production of automobiles, electronics, and dentistry. The price of precious metals tend to be volatile in the short-term and palladium is no exception. It has a history of price swings, especially since there is has been a supply shortage of palladium, which could help its price rally.
5 Reasons to Invest in Palladium
1. Palladium Is a Store of Wealth
Just like gold, silver, and platinum, palladium is often held as an investment. It holds several benefits when used as a store of wealth, just like other precious metals. A store of value refers to an asset or commodity that maintains its value over a period of time. Palladium is a store of wealth whose value moves at a similar pace like that of gold.
Moreover, palladium is a rarer precious metal that gold, which means its value can increase in the future. Keep in mind that palladium is more volatile compared with other precious metals. This means its price may fluctuate due to changes in supply and demand.
2. Palladium Has Many Use Cases
One of the reasons that palladium is valuable is because it has many use cases. Palladium is used in catalytic converters for automobiles. This means there is high demand for palladium in the auto industry where more than 80% of palladium’s uses come from.
Palladium is also used in the production of chemicals to develop industrial materials. While palladium’s other industrial uses account for a smaller percentage, this segment is on the rise. Palladium is also used to make jewelry, is present in dental procedures, and is used as a component for electronics like laptops and smartphones.
Raw palladium in an unrefined form.
3. Palladium Can Provide Portfolio Diversification
Investing in palladium is a great way to add to your portfolio’s diversification. Adding palladium to your investment portfolio allows investors to diversify among precious metals and achieve the unique benefits of palladium.
The broader market has been on a downward trajectory since the start of the year. Stocks have been falling and investors are removing risky assets from their portfolio. Thus it’s important to diversify among different asset classes like palladium.
Precious metals like palladium, gold, and silver have a history of strong, consistent performance during tough economic times. This is an added benefit for investors looking to manage the tough market environment that we’re in today.
4. Palladium Offers Portfolio Growth
Investors can include palladium in their long-term investment for portfolio growth.
Living in a post-pandemic economy means dealing with inflation. Commodities and physical assets like palladium are some of the best hedges against inflation. For the past six months, palladium has returned more than 7% to investors. During a similar time frame, the S&P 500 is down more than 16%. In a market lined with uncertainty, palladium can help add growth to an investment portfolio.
5. Palladium Is in High Demand
Palladium is a precious metal that is in high demand. Palladium is in high demand from various industries but there is a low supply. This makes the precious metal scarce, which is an attractive feature for an investment. There are many applications for palladium, making it one of the most sought after precious metals on the market.
Russia is one of the world’s largest producers of precious metals, especially a rare one like palladium. The ongoing war between Russia and Ukraine hinders palladium production, which can prop up the value of palladium.
Furthermore, with the push to be more environmentally conscious, the auto industry is looking to reduce vehicle exhaust emission through catalytic converters. Palladium is one of the components in these converters.
3 Ways to Invest in Palladium
1. Palladium Coins
A popular way to hold palladium is to physically own palladium bullion. This can consist of palladium bullion bars or coins that you can buy from a precious metals dealer. The two forms of palladium include bars and coins and are available in different sizes.
The mints that produce palladium bars include PAMP Suisse palladium bars, Credit Suisse palladium bars, and Johnson Matthey Lewis and Clark palladium bars to name a few.
Popular palladium coins include Canadian Palladium Maple Leaf coins, Russian Ballerina palladium coins, and American Eagle Palladium coins.
The reverse design of the American Palladium Eagle coin.
2. Palladium ETFs
An easy and passive way to invest in palladium is through exchange-traded funds. With palladium ETFs, you are not directly investing in the precious metal, rather you are investing in a fund backed by palladium. Palladium ETFs allow investors to gain exposure to the precious metal without having to personally own it. ETFs carry an expense ratio which is the management fee associated with the fund. These fees may vary depending on the investment product.
Examples of palladium ETFs include Aberdeen Standard Physical Palladium Shares ETF (ticker: PALL). This Aberdeen ETF is designed to track the spot price of palladium bullion by securing bars of palladium in a vault. PALL’s current value is $191.60 and holds an expense ratio of 0.60%.
Another palladium ETF to consider is Sprott Physical Platinum & Palladium Trust (SPPP). Investors interested in this ETF have an investment goal of finding an alternative way to hold physical platinum and palladium. SPPP’s price is roughly $13 per share and holds an expense ratio of 1.04%.
3. Palladium Stocks
Similar to palladium ETFs, you can also purchase palladium-linked stocks. Purchasing shares of publicly-traded companies that are focused on palladium can be another way to gain exposure to this precious metal.
Examples of palladium-related stocks include palladium miners such as Sibanye-Stillwater (SBSW) and Impala Platinum Holdings (IMP).
Written by Paulina Likos
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