By any definition palladium is a rare and valuable metal. Yet it does not customarily enjoy the cachet and prestige of gold, silver and platinum. That may change, as investors learn of its unique and promising attributes.
Over 90% of current demand for the lustrous white metal palladium comes from its use in four sectors: autocatalysts, i.e., catalytic converters in gasoline and diesel engines (50% of total demand), a market in which it competes with its sister metal platinum; jewelry (15%) where it is used alone and to make white gold alloys; electronic switches, capacitors and contacts (15%); and dental bridges and crowns (12%).
Palladium's Investment Prospects
Palladium's immediate future largely depends on those legacy markets continuing. Called the "metal of the 21st century," palladium's unique attributes could contribute to explosive demand in three emerging industries:
- Fuel cells. Palladium may both enable everyday gasoline and natural gas to fuel these devices, and catalyze the cell's chemical reaction.
- Semiconductors and solar photovoltaics. Fabrication of these devices requires ultra-clean hydrogen, delievered via palladium membrane purifiers.
- Cold nuclear fusion. If fusion ever delivers on its promise of limitless clean energy, it will probably involve palladium's unique hydrogen absorbing property to catalyze the nuclear reaction.
There are five common ways to acquire palladium:
Purchase Palladium Investment Coins
Some precious metals investors prefer government-issued coins over bullion because the former are accepted and easy to sell, and seldom need to be assayed to prove they are authentic.
Palladium has no history of being used as money. The Kingdom of Tonga issued the first palladium coin in 1966. Since then Russia, Australia, Portugal and other government mints have produced over 90 commemorative coins.
Compared to the variety of gold, silver and platinum investment coins, there are fewer palladium mintages. The 1 troy ounce Canadian Palladium Maple Leaf, introduced in 2005 with a C$50 face value, was the world’s first government-issued legal tender palladium bullion coin. Coins sell at a premium over palladium's spot price because they are coveted for their beauty and collectability. The Royal Canadian Mint also has gold, silver and platinum coin issues that compliment the palladium version. American-minted coins from 1/10 to 1 ounce are traded.
Buy Investment Platinum Bullion
.999+ pure bars are sold in 1 troy ounce to 1 kilo bars. These are produced by PAMP Swisse and other (usually European) banks and hallmarked to certify weight and purity, and are accompanied by an official assay certificate guaranteeing palladium content. A U.S.-made bar, from Montana's Stillwater mine, is available.
Buy Palladium Mining Company Stocks
There are few pure plays in the palladium mining world, compared to gold, silver or platinum. Stillwater Mining (NYSE: SWC) in Montana is one of only three large-scale production sites in the world. North American Palladium (AMEX: PAL), another relatively pure play, is much smaller and more speculative than Stillwater.
Some of the world's ten major platinum producers also mine and/or refine palladium, which is a PGM, or platinum group metal.*
Invest in Palladium Exchange Traded Funds and Notes, EFTs, ETNs.
Begun in early 2010, palladium and platinum EFTs (e.g. NYSE Arca platform: PPLT and PALL) typically buy and store a basket of physical metal and sell shares, the price of which tracks the metal's spot price. An ETN acts as if it owns the metal but does not actually buy and store it; it just prices as if it did.
There are several flavors of ETFs and ETN. Research carefully before investing.
Take a Futures Position in Gold, Silver, Platinum and Palladium
Gold, silver, copper, platinum and palladium are traded on public futures exchanges (e.g., the CME NYMEX), where speculators can quickly reap large profits if their hunches are correct. The inherent danger of futures trading is a crushing loss if the market goes the wrong way. Only investors who have a good understanding of how futures markets work – and excess capital–should consider this alternative.
Buyers should know that historically, about every five to seven years, one or more car maker has announced it plans to substitute as much platinum for palladium in its catalytic converters as it can, or vice versa. This sends one of the metals soaring, and the other plummeting. Also, supply disruptions in South Africa and Russia, where most palladium is mined, can play havoc with prices.
* There are six PGMs: platinum, palladium, rhodium, osmium, iridium and ruthenium. They are all rare, expensive, have similar physical and chemical properties, cluster together in the periodic table and tend to commingle in natural ores.
George Daleiden - I was a science major in college and later a career member of the Institute of Food Technologists. I worked in the processed food and ...
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