Palladium as an investment
November 21, 2022 (Investorideas.com Newswire) If you don't want to keep a stack of palladium coins hidden under your bed, there are other ways to gain exposure to the palladium price. There are, for instance, many retail brokers available online that offer palladium derivative trading. Among day traders, contracts for difference (CFDs) based on palladium are popular, partly because CFDs are available for pretty much any bankroll size. They also make it easy to speculate on both upward and downward price movements.
Another option is to invest in an exchange-traded fund (ETF) with exposure to palladium or the palladium metal group. There is, for instance, the WisdomTree Physical Palladium fund which is traded on the London Stock Exchange (LSE:PHPD). This fund, one of the pioneers in the field of palladium ETFs, is backed by allocated palladium bullion. If you prefer NYSE-listed funds, you can, for instance, take a look at NYSE:PALL.
A more indirect way of investing in palladium is to invest in palladium mining companies. However, that gives a less straightforward exposure to the palladium market price as there are other factors to consider, e.g. company management and geographical risk. Finding a mining company exclusively focused on palladium is also difficult, so you will likely gain exposure to other metals alongside palladium.
Here are a few examples of public palladium mining companies:
- Norisl Nickel is a Russian mining and smelting company where the main products are nickel and palladium. It is headquartered in Moscow but listed for trading on exchanges in Mexico City and London as MCX:GMK and LSE:MNOD, respectively.
- Impala Platinum is a South African holding company listed on exchanges in Johannesburg (JSE:IMP) and London (LSE:0S2J). It operates mines for platinum group metals, nickel, copper, and cobalt. It has a strong presence in South Africa (including the famous Impala Mine), but it is also active in Ontario, Canada, since 2019 when it acquired North American Palladium.
- Stillwater Mining is a platinum group mining and processing company in the Stillwater igneous complex in south-central Montana. It is also involved in recycling metals from catalytic converters. Stillwater Mining is the only palladium and platinum mining operation in the USA. The company is listed on the New York Stock Exchange and is traded as NYSE:SWC.
Buying physical palladium
Investing in physical palladium typically involves purchasing standardized coins or bullions since they are easier to sell to other investors than random palladium objects. In other words: there is more liquidity in the standardized palladium market.
Examples of palladium coins that have been issued by a national government:
- The Canadian Palladium Maple Leaf coin
- The Chinese Panda palladium coin
- The United States Palladium Eagle coin
- The Tonga Palladium Hau coin
- The Russian Palladium Ballerina coin
Compared to gold and silver, the history of governments/nations issuing palladium coins is very short. The first governmental issue of palladium coins took place in Sierra Leone in 1966, followed by Tonga in 1967.
Governmentally issued palladium coins are normally issued in small batches. One example is the Canadian Big & Little Bear Constellations palladium coins. Totalling just 1 200 coins, it is the lowest-mintage coin ever minted by the Royal Canadian Mint.
Understanding palladium demand and supply
What is Palladium?
- Palladium is a silvery-white metal with the atomic number 46.
- In the periodic system, the symbol for palladium is Pd.
- The ISO4217 code for palladium is XPD.
- On the spot market, palladium is traded using the code XPD. When settled in USD, the code is accordingly XPDUSD.
- Palladium is one of the platinum group metals (PGMs), alongside rhodium, ruthenium, iridium, osmium, and - of course - platinum. They all have fairly similar chemical properties. Palladium is the least dense of them and also has the lowest melting point.
The automotive industry largely drives the global demand for palladium. Today, more than half of the supply of palladium (and its congener platinum) is used in catalytic converters that convert harmful gases to less dangerous substances. The global market price of palladium is therefore impacted by the strength and projected strength of the automotive industry.
Palladium is also used in fuel cells, electronics, hydrogen purification, medicine and dentistry, groundwater treatment, jewellery, and certain chemical applications.
Palladium for investment usage also drives demand.
Ore deposits of palladium are rare, and only a few countries worldwide currently have a large palladium production.
Examples of large known palladium deposits:
- The Norilsk Complex in Russia
- The norite belt of the Bushveld Igneous Complex in the Transvaal Basin of South Africa
- The Stillwater Complex in Montana, USA
- The Sudbury Basin and Thunder Bay District of Ontario, Canada
Russia and South Africa dominate global palladium production, with each country accounting for roughly 40% of total global production.
Recycling is also a source of palladium. A majority of the recycling involves extracting palladium from scrapped catalytic converters since each converter contains a significant amount of palladium.
Palladium and the 2020s commodities boom
The price of palladium has been rising sharply during the commodities boom of the 2020s. The Covid19 recession initially caused a drop in commodity prices, but it was soon followed by a strong increase, partly because supply chain issues reduced supply. On May 3, 2021, the palladium price reached a new all-time high of $2,981.40 per ounce. This peak was largely driven by predictions that the automobile industry would need more palladium (it is used in catalytic converters).
In 2022, international embargoes following the Russian invasion of Ukraine created new supply chain issues for several commodities, including palladium, as roughly 40% of the world's total palladium production took place in Russia (especially the Norilsk Nickel company), and Russia was the main supplier of palladium for the European market.
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