PALLADIUM – Metal of wisdom

Palladium is the 46th element in the periodic table. Its chemical symbol is Pd. Its chemical behaviour is very similar to platinum and belongs to the group of so-called platinum metals (which also includes osmium, iridium, ruthenium, rhodium and palladium). Its special characteristics include its hardness and high melting point of 1,555° C. As it is under the value for platinum it is somewhat easier to process. Palladium possesses characteristics of precious metals, but is significantly more reactive than its relative platinum.

Palladium was discovered by the British chemist W. H. Wollaston when he was examining South American platinum ore. Its name, with its Greek origin, stems from the asteroid “Pallas” which was discovered two years previous.

It is used as a cheaper substitute for the more expensive platinum in building catalysers, and is mainly used in the automobile industry. Today it is hard to imagine a world without palladium.

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Supply and demand

Palladium is a rare metal. It is however more common than platinum or gold. Besides its use in automobile catalysers, it is used in electronics, dental technology and chemistry. In contrast to platinum, it only plays a secondary role in the jewellery industry. Palladium is mainly used for hardening or used to manufacture white gold with a ratio between 20% and 40 %. Similar to the demand for other precious metals investment in recent years, the number of serious investors has increased in response to increasing inflation concerns. 14% of the demand in 2009 was purchased for investment purposes.

Pure palladium deposits are very rare. In general, palladium occurs together with other metals of the platinum group in platinum ores. The proportions can vary considerably. In some places the proportion of platinum is higher, while in others, there is more palladium. Furthermore, palladium can be extracted as a by-product of nickel or copper extraction. However, the proportion of palladium is much lower in such cases. The large volumes in nickel and copper extraction make the extraction of palladium profitable. Due to its comprehensive nickel mining, Russia has grown to become the largest palladium producer. 50% of the remaining supply is spread across the globe. South Africa, with 35% of the supply, also plays a considerable role as a supplier.

Palladium as a means of payment

Palladium practically does not play a role as a means of payment. There are very few palladium investment and memorial coins. These are recognised at face value in the corresponding countries.

How is the palladium price determined?

The fair value for the precious metal palladium is determined by supply and demand. The prices for precious metals are determined daily on the world’s financial markets. Therefore, in the past, there was evidence of a negative stock-commodity correlation. In times of strong share markets, the price for raw materials would decrease. It was only in troubled times and turbulent markets that investors would invest in real values such as precious metals.

Similar to gold and silver, the palladium price is determined on the free market by fixing the palladium price, which takes place over the telephone. The fixing takes place twice every trading day on the London Platinum & Palladium Market. Furthermore, New York and Tokyo are important trading locations for palladium.

Numerous factors affect the platinum price:

  • The current rate for US dollars (as palladium is traded in USD)
  • Price development and mining quotas for metals where palladium is extracted as a by-product
  • Supply (in particular Russia) & demand (in particular the automotive industry)
  • Global economic cycles
  • Political unrest
  • Global warehouse inventories

Palladium as an investment

In the investment arena, palladium is the newest representative next to gold, silver and platinum, and is merely seen as a niche. However, its growth is considerable. For 2009, Matthey & Johnson state an increase in physical net investment of 51.2% against the previous year to 635,000 ounces. Currently palladium is nominally the second cheapest precious metal after silver. This wasn’t always the case. In 2001, the price per ounce surpassed the 1,000 dollar mark. Therefore, palladium was the first investment metal to reach four digits.

In the investment sector, the demand for palladium is less widely spread than for platinum. Palladium only serves as an investment instrument in Europe and North America. European investors, with 540,000 ounces, are far ahead of the North Americans who hold a mere 95,000 ounces.

In 2009, investors in palladium fared best in terms of performance. The smallest market for investment metals attained the highest profits with 114 % (in USD) or 108% (in EUR). In their 2010 Commodity Yearbook, the experts at LBBW state the cause for this being the high industrial usage intensity and an anticipated economic recovery.

Did you know that...
  • palladium can absorb up to 900 times its own weight in oxygen.
  • the first official minting of a platinum memorial coin was carried out in 1967 in the Kingdom of Tonga on the occasion of the coronation of Taufa'ahau Tupou IV.
  • palladium was used in jewellery production for the first time in 1939.
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