To investors, palladium is still the least known and least understood of the four major precious metals. However, its performance as an investment has been by far the strongest over recent years. Palladium saw gains of nearly 40% in 2017, 19% in 2018, 54% in 2019, and has reached new record highs over $2,500 in 2020.
Palladium (Pd), like platinum, is a recent human discovery. As early as the 1700s, Brazilian miners talked about a metal they called
ouro podre (‘worthless gold’). This metal turned out to be an alloy of palladium and gold. Palladium was not truly discovered until 1803 when the British chemist, William Hyde Wollaston, first separated the gold from the palladium and discovered palladium catalytic properties.
Palladium is a soft white metal ductile metal. It is one of six Platinum Group Metals (PGM): Iridium (Ir), Osmium (Os), Palladium (Pd), Platinum (Pt), Rhodium (Rh), Ruthenium (Ru). The platinum group metals are best known as catalysts because of their chemical stability. According to the International Platinum Group Metals Association, one-fourth of all goods manufactured contain a platinum group metal or had a PGM play a key role in its production.
Like platinum, the most common use for palladium is the catalytic converters (80% of demand) required in all automobiles and is the active metal in cleaning the toxic substances in engine exhaust. Recently, key strategic uses for palladium have been discovered in fuel cells and hydrogen storage. Palladium is also used in connector plating for many electronic devices, as well as in jewelry, medical devices, cleaning supplies, and dental fillings.
The demand for palladium has grown substantially due to growth in the auto industry in such emerging countries as China and India with new automobile demand from an emerging middle class. These same countries are also taking active steps to reduce harmful emissions. According to TD Securities, a palladium supply deficit of nearly 800,000 ounces is expected for 2020 following a deficit of over 880,000 ounces in 2019. Very little new supply is reaching the market with limited new mining capabilities in the primary mining regions in South Africa and Russia.
Palladium is considered a precious metal because it is extremely rare. It is more than 30 times rarer than gold. There are very few significant deposits in the world that can be mined and therefore only a few palladium producing countries.
According to data from Johnson Matthey, here are the sources of the world’s palladium production:
- South Africa 40%
- Russia 38%
- North America 14%
- Zimbabwe 6%
- Other 2%
Palladium has serious constraints on growth in supply due to:
- Limited reserves; with palladium more than 30 times more rare than gold there are very few economically viable deposits to be mined.
- Russia has been unable to make significant increases in mining output
- Political instability and cost issues in South Africa have prohibited more production
Global mining companies have not announced plans for significant new palladium mining projects and any new mines could take up to 7 years to be in full production.
South Africa is experiencing internal turmoil and Russia is currently the target of global sanctions. Any disruption of the palladium supply chain could drive the price dramatically higher.
HOW DO YOU BUY PALLADIUM?
Palladium is available in both coin and bar form and is readily available to buy and sell through Midas Gold Group.
Both the US and Royal Canadian Mint produce a government-issued palladium one ounce coin. Palladium is also available in bar form from such reputable mints as PAMP Suisse and Credit Suisse.
SHOULD I BUY PALLADIUM IN ADDITION TO GOLD AND SILVER?
Unlike gold and silver, palladium is not a traditional form of human currency or “Money Metal”. It has no monetary history and traditionally has not been a safe-haven asset during market crashes and times of geopolitical uncertainty.
However, investors who allocate some portion of their precious metals portfolio to palladium gain diversification and exposure to different markets and market fundamentals. Such diversification can reduce volatility.
Further, the fundamentals of the palladium market are still strong even at these high prices. In addition to profit potential, physical palladium as an investment has the advantage of being a private tangible asset and may be an effective hedge against inflation.
Your dedicated Account Representative at Midas Gold Group can help you determine if an investment in palladium is appropriate for your specific goals and concerns. As with all of our products, the process of buying palladium through Midas Gold Group is simple, straightforward, private, and secure.