Why Invest in Palladium?
When investing in precious metals many people will turn to the most popular names ( gold and silver). There is a general awareness held by most investors that these metals are readily available. There are other precious metals that are definitely worth a look when considering investments.
Forgotten often by retail traders, Palladium is an excellent commodity with a specific trendsetting chart. You can have a look here or scroll down to the bottom to see for yourself. This precious metal has grown in value to the tune of over %1,000 since the crash in 2008. Yet is still overlooked by many because of the price and the little recognition the precious metal receives.
The palladium market is not simple. However there are some simple factors that take priority consideration when looking for an entry point into the market.
The Basics – What Drives Palladium Prices?
We are going to list some major factors that drive the palladium sector. It is much more expensive to purchase than gold. Even at record highs gold has not outpaced palladium. Palladium has been enjoying its own record setting run. Read on to see which factors have played the biggest roles in the success of this precious metal.
Auto Industry Demand – This is the absolute biggest contributor to palladium demand. The auto industry is responsible for around three quarters of the global demand for palladium. This is because palladium is a main resource when constructing and manufacturing catalytic converters .Keep an eye on Auto behemoth countries like the USA and China to gain insight into potential price movements in the near and distant future.
Geopolitical Concerns – This one is highly subjective to experts and should be taken with a pinch of salt when considering over all decision making value. Much of the world’s palladium supply comes from Russia and parts of Canada. When you add in South Africa, this accounts for about 80% of the total supply worldwide. There have been turbulent supply struggles in the past when countries discuss tariffs, sale and supply. This could be a good deciding factor for an investor who is looking into short term price movement.
Substitution – Palladium is expensive. There has been a scrutinized discussion for the Automotive industry to seek a more cost effective, environmentally friendly alternative.
As mention earlier if supply ties were cut off due to the replacement of palladium in catalytic converters, the market would take a large hit in circulation and demand. Keep a finger on the pulse for national and company level changes to manufacturing policies when investing in palladium
US Dollar Strength – Palladium is fore mostly bought and sold with the US Dollar. Meaning that the USD is tied highly to the performance of palladium. When the USD fails, Palladium has never went up in price. Therefore it can be argued that palladium is a bull market investment. When the forex market is in a correction, palladium holders who are thinking of selling in the near future may want to consider deliberating an early or extended exit.
Ways to Invest in Palladium
There are several ways in which you can do this much trading gold or silver markets. The main points which will vary here are the liquidity, and how closely the investment is tied to the palladium price.
The most direct way to get involved in trading palladium is to purchase palladium bullion directly from a reputed mint or other trustworthy supply source. This physical purchase of the metal typically takes the form of coins, collectable coins, or bars of the metal which can be purchased at different weights. Naturally, this is absolutely tied to the palladium market prices, though you should be mindful that a small premium is generally added by the seller, and this can be a substantially more difficult palladium investment to resell quickly if the price changes.
Palladium stocks are another popular way to get involved in trading the market. This means buying stocks in palladium related companies through your broker. They are typically very closely connected to the demand and price for palladium, though you also have to be careful to understand the key metrics of the individual company performance too. If you are looking for an even higher volume market, you may choose to trade palladium options or futures contracts. These can be higher risk, but are certainly the most liquid in terms of your ability to quickly trade palladium.
Finally, if you are seeking a very well-balanced way to invest in palladium, ETFs may be a good choice for you. There are essentially baskets of stocks which you can invest in at one collective price. Investing in a thematic ETF related to palladium will give you good exposure to many of the main players in the sector, and should also hedge your risk to a certain extent if the prices do fall. These ETFs can often pay a healthy dividend too.
Who Should Invest in Palladium?
Palladium is a speculative investment and could be argued effectively in either direction. A few things know is that palladium has been rising steadily and is enjoying all time highs. Forecasts of the major factors in palladium mining and demand have shown a bullish outlook. It remains a diverse asset and could be considered medium to low risk when comparing it to alternative assets. It is one of four IRS approved precious metals and can be held with tax advantages.
Palladium should be subjected to a risk profile analysis on the individual level. Meaning that if you can stomach volatility and hold long term, it may be one of the best things you can invest in today. It is tied heavily to the USD and while little retailers are trading the asset, it receives major publications. Palladium is in the top percentile when it comes to stable assets and can rival the other four IRS back precious metals.