Palladium is commodity that you probably don’t know too much about but use all the time. It has a number of industrial applications and as the world has grown over the past decade prices of palladium have soared. In just the past year, palladium is up more than 66% and is presently trading at about $760 per ounce.
This rare and silver-white colored metal was discovered in 1803 and is one of the six platinum group metals (PGMs). Palladium is used in many of your electronics: cell phones, computers, LCD televisions, etc. It is also used in dentistry, medicine, hydrogen purification, and it plays a key role in the technology for fuel cells. Yet the majority of the global supply of palladium goes to the manufacturing of catalytic converters. A catalytic converter is a component in the exhaust systems in cars, converting up to 90% of harmful gases from auto exhaust into less harmful substances. As such, demand for palladium is generally correlated to the health of the global auto industry.
Therefore, it wasn’t too much of a surprise to see palladium prices fall more than 14% in the wake of the earthquake/tsunami/nuclear disaster in Japan, which is home to Toyota, Honda, etc. Since that time palladium has recovered about half of the value it lost but there are many people who think it’s only a matter of time before palladium retests its 52 week high of about $850. This is not only due to people’s faith in Japan’s ability to restore its car production to full capacity by the end of 2011 but also because of its value as a precious metal. Just as gold and silver have seen significant gains due to the weakening dollar and a general fear in the value of fiat currencies, so too could we see a run in palladium.
Another factor supporting price rises for palladium is that producers are finding it challenging to keep up with surging demand, as investment in new mines slowed down during the financial crisis. So if the demand continues to grow in Russia, China, and even the US, palladium prices could really escalate higher.
Many investors in the past have shied away from investing in palladium for a lack of information and know-how concerning how and where to buy the precious metal but now there is a palladium ETF, ETFS Physical Palladium Shares (PALL). PALL seeks to reflect the performance of the price of palladium and it is a physically-backed ETF, meaning that it buys and stores palladium in secure vaults.
What do you think about palladium? Are you familiar with this precious metal? Where do you think its price is headed? Please leave your comments below.