Palladium is a silvery white metal that has long been overshadowed by gold, silver and platinum, when it comes to investment. It is in the same group of metals as platinum. Other members include iridium, rhodium, osmium and ruthenium. They are all very rare metals, which makes them good as an investment. It’s primary use is in catalytic converters in automobiles. Figures indicate that of the more than 200,000 kilograms mined every year, 75% is used in the auto industry.
How Palladium is Produced
This precious metal is extracted from ore that is mined. The production of palladium is often the result of another production. For example, it can be a by-product from the production of nickel and copper. When the ore is extracted through mining activity it is processed using froth floatation techniques. This means that the rocks are crushed and then immersed in tanks which contain a mixture of different chemicals. These chemical solutions cause the metals to separate from the clay and any other rocks with no value. Palladium can also be produced by recycling scrap metal.
Influences on the Price of Palladium
As its main use is in the automotive industry, the price of this precious metal is influenced by vehicle demand. However, there are a number of other factors, such as investment demand, inflation and the price of the US Dollar, supply from Russia and South Africa, recycling and the price of any substitutes.
What Might Influence the Price of Palladium in the Future
There are three important trends that could affect the price of palladium in the future:
Demand in China – China is one of the biggest consumers of palladium and is likely to be increasing its consumption in the future. Its economy may have slowed down in recent years, but there are indications that this may be about to change. If you think this is likely to happen, then investing in palladium is a good bet to make.
The Cost of Energy – The cost of mining for palladium is always increasing, thanks to the rising cost of fuel and energy. This means that mines may be closing or consolidating, thereby increasing the price of palladium.
Demand from Investors – More and more traders are looking to precious metals for investments. Gold and silver markets are becoming increasingly crowded which means investors are looking for new ways to widen their portfolios.
What are the Risks?
As you might expect, investing in palladium also has its share of risks. There could be a global recession, which will impact on the automotive industry as well as Chinese demand. The demand for palladium also stands to be affected by the development of cheaper substitutes. Any economic or political turmoil will also weaken the demand for precious metals and many other commodities.
If you’re interested in investing in the palladium market, Indigo Precious Metals will be able to help.