Palladium is a shiny silvery metal that forms a part of the platinum group consisting of five other elements: platinum, rhodium, ruthenium, osmium, and iridium. It is a rare metal that is mainly mined in Russia and South Africa market.
The metal is characterised by non-corrosive and malleability features. It caters to various segments such as automobile, electronics, chemical, jewellery, dental, fuel cells, and solar cells. However, more than 80% is consumed in the automobile industry as part of the car’s exhaust system, which converts toxic emissions into a lesser damaging carbon-dioxide and water vapour.
The automobile sector hasn’t been able to find a substitute for the metal, making it irreplaceable and more attractive for many investors. The prices in the market have been depicting an increasing trend historically and have surpassed the gold price.
Investments in the metal can be made in exchange-traded funds (ETFs), bullion, and stock. ETFs are traded like stocks on an exchange; however, it tracks the metal like an index fund.
Bullion is a comparatively more uncomplicated option wherein an investor can physically hold bullion bars and coins, including collector’s coins. An investor can also consider investing by way of purchasing stocks of companies that transact around the metal.
Palladium prices in the market are determined by various factors as listed below:
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Demand-Supply Gap on Market
The demand for this metal has overshot its supply, thereby resulting in a price rise. The metal is a by-product of platinum and nickel mining. Hence, it leaves a little scope for the miners and producers to correct the demand-supply gap.
The total demand in the year 2020 is forecasted to exceed the supply, for the ninth consecutive year. Moreover, more than 70% of the global demand is dependent on Russia and South Africa for supply.
Industrial Consumption
Palladium mainly caters to the automobile industry, and hence the pricing also gets influenced by the number of vehicles manufactured and sold. Since it forms a part of the catalytic converter, which is a part of the car’s exhaust system, the demand and pricing are also influenced by the vehicle emission rules.
Speculative Players
The metal price is also partly influenced by speculative activities. Since recent times, the hedge funds have been placing bets that the metal prices will soar. In the recent past, the metal-backed ETFs have witnessed net cash outflows as the investors lent the metal to other users at lucrative rates.
A price swing is when the large traders enter or exit. Further, the price is anticipated to rise due to the limited scope of increasing the output due to the metal’s secondary nature.
Recycling in Market
Recycling the metal, in the form of recycled catalytic converters in the automobile industry, may also influence the metal price causing it to move downwards.
The above factors help understand the reasons behind the price movement of palladium, which also supports an investor with a hedging mechanism against inflation while ensuring some diversity in the portfolio. Make your purchase from a trusted store to find the best quality and certified products at highly competitive prices.
