10 Things to Know Before Investing in Palladium

When someone considers buying precious metals, they typically think of gold and silver first. Due to increased demand for alternatives, however, investing in palladium has become a popular way to purchase bullion. Before going this route, though, there are some things you should know.

What currently stands out to most people is palladium’s recent performance relative to gold. While nearly everyone viewed the yellow metal as “king of the hill,” palladium proved this isn’t a permanent title. Still, being as informed about your investments as possible is ideal.

Each of the following facts will provide more insight for those investing in palladium. There’s no guarantee that this bullion will always outperform gold. But when you have a better understanding of the precious metal, you can make better investment decisions for your future.

1.  The Discovery of Palladium Is Thanks to Platinum

Humans have valued gold and silver for thousands of years. Even platinum has been around since before the American Revolution. Anyone investing in palladium, though, has got the “new kid on the block.” That’s because humans didn’t isolate the metal until 1803.

Interestingly, this was entirely by accident. William Wollaston was dissolving platinum in acid during the discovery. While he was doing so, an unexpected metal got left behind. This was palladium. Wollaston started by selling it to dealers, but in 1805, he introduced it to the Royal Society of London.

Platinum may have been where palladium was first discovered, but the latter of these metals shows up in various alloys. This makes it more difficult to mine, so maintaining supply can be difficult.

2.  Some Scientists Believed Palladium Was a Hoax

When Wollaston discovered palladium in 1803, not everyone was on board with his findings. In fact, investing in palladium may have taken centuries longer if some experts had their way. For instance, respected chemist Richard Chenevix claimed it was nothing more than a mixture of mercury and platinum.

There were already rumblings during this time that mercury had toxic properties. Fortunately for Wollaston, the debunking of this claim didn’t take long. By the time the Royal Society of London recognized palladium, they knew that the discovery of a new precious metal had occurred.

Due to the metal’s various properties, its use in jewelry initially far exceeded investment in palladium bullion. Most of its use today, however, doesn’t fall into either of these categories.

3.  Investing in Palladium Is Like Investing in Automobiles!

Palladium has had a variety of uses over the years. Today, you can find this precious metal in white gold and even dental implants. The overwhelming majority of mined palladium, though, goes straight to the automobile industry.

One of the primary characteristics that makes palladium so popular is that it won’t react with oxygen. Additionally, it has properties that can filter out toxic fumes. Each of these make it the material perfect to use in vehicles’ catalytic converters.

Increased interest in investing in palladium has certainly driven up the cost of the metal. You really only need to look towards the auto industry, though, to understand current demand. Around 85% of the metal goes straight into catalytic converters. No other industry even comes close.

And since demand is still climbing, there’s no telling how high this metal’s value will go.

4.  Palladium Is Worth More Than Its Weight in Gold

When 2019 came around, palladium became the most expensive of the four major precious metals (e.g., gold, silver, platinum and palladium). You may have noticed this by checking pricing charts, but you might not know how beneficial this is.

5.  Simple Magnet Tests Can Identify Many Counterfeits

If you’re going to buy palladium bars, it’s important that you know what you’re getting. This holds true for any type of bullion you’re purchasing — even if you’re just buying scrap online. If you’re not working with an established dealer, though, a simple magnet test could save you money.

This is because palladium is not magnetic. If you place a magnet alongside a piece of suspected palladium, it shouldn’t budge. Fortunately, most counterfeit palladium items have iron in them. Iron is magnetic, so you can spot these fakes in an instant.

Of course, not all fakes will have iron in them. When investing in palladium, the magnet test should only be used to eliminate items — never to verify them for certain. This is why it’s so important to work with a reputable precious metals dealer.

6.  Platinum Could Replace Palladium — But There’s a Caveat

Palladium is an integral metal for catalytic converters. Of course, it’s not the only option out there. Platinum is also a great metal option for these auto parts. And with palladium prices continuing to increase, platinum may begin to seem like a more affordable alternative.

In fact, platinum was once the preferred metal for catalytic converters. Wouldn’t it make sense for automobile manufacturers to just switch back? Unfortunately for them, it’s not quite that easy. It would take several years to create new processes to use platinum rather than palladium.

In fact, Citigroup doesn’t expect that platinum substitution will even be close to a sizable issue until 2023 or 2024. This means anyone investing in palladium will probably continue to benefit from increased demand in the automotive industry.

7.  Palladium Is More Rare Than Gold or Silver

While palladium may perform better than other precious metals occasionally, it hasn’t always been this way. In fact, it wasn’t until 2019 that the silvery white metal surpassed gold in value. Regardless of the underlying prices, though, palladium has always been rarer than gold and silver.

This isn’t surprising considering how we get palladium. The ore that we derive the metal from typically is overwhelmingly platinum. In fact, only about one-third of the ore mined to produce the metal actually contains it. This rarity shows promise of continued price dominance.

8.  Two Countries Drive Investing in Palladium

While the demand for palladium is worldwide, only a few countries actually produce it. If your car has a catalytic converter or you own any palladium, there’s a good chance it came from South Africa or Russia. The former actually produces over 40% of the world’s supply.

While this tidbit of information may not seem important for those investing in palladium, it can actually have a massive effect. With minimal supply options, even minor issues in these countries can cause disruption. In turn, this can drive up prices of the metal.

South Africa constantly deals with electrical blackouts, and Russia experienced heavy flooding in 2021. Both these issues can interrupt supply, and even when temporary, they can cause price spikes.

9.  Experts Expect a Run to $3,000 Per Ounce

In April 2021, people investing in palladium saw massive profits as the metal broke records. It climbed above $3,000 per ounce before showing any sign of slowing down. Fortunately for investors, experts expect this to occur again very soon.

Production simply could not keep up with demand for palladium in recent years. Because of this, financial institutions like Citibank expect the metal to climb back up to and beyond the $3,000 mark. Whether you’re buying palladium coins or bars, this could mean big profits.

10.  Shortages Make Investing in Palladium Profitable

Problems with palladium production can cause price spikes, but they don’t come close to explaining continued demand. The world has experienced a palladium deficit for several years now, and we cannot tie this to a single country’s temporary production problems.

In reality, the world simply needs more of the metal. Tighter environmental regulations on auto producers are the major culprit. They have to create vehicles with smaller carbon footprints, and catalytic converters are the current best way to do this.

While the demand for these auto parts may decrease with heightened use of electric vehicles — thus driving down the price — it’s difficult to envision a future where this happens overnight or unexpectedly.

Start Investing in Palladium Today!

Whether you’re reading this guide at the height of palladium’s popularity or during a time when gold is back up top, the knowledge you’ve garnered offers the chance for better investments. We’ve seen other bullion types jump higher than gold and then fall, so this is a possibility with palladium.

The important thing to remember is that this doesn’t mean it’s not a smart investment. Each of the issues we’ve discussed points towards a precious metal with continued high demand. While there are alternatives for palladium use, it would take years for them to become widespread.

At Silver Gold Bull, our goal is to ensure our clients have all the information necessary to make smart investment decisions. Whether this is your first time investing in palladium or you’re a seasoned buyer, knowledge will remain your most powerful weapon.

Visit our Palladium Bullion Products page today to see all your options!