What Is Palladium?
Palladium is starting to prove itself as a dark horse investment that has so far passed under the nose of many commodity traders. Let’s have a closer look at this precious metal:
Palladium is a chemical element, with the chemical symbol Pd. Palladium is a soft, rare and lustrous silvery-white metal. The metal was discovered by William Hyde Wollaston in 1803. This element was named by Wollaston in 1804 after the asteroid Pallas, which had been discovered two years earlier. Palladium is a transition metal with a standard atomic weight of 106.42g-mol-1. Palladium has a melting point of 1554.9oC (2830.82oF) and a boiling point of 2963oC (2830oF). Palladium is a crystallized metal that is face-centered cubic. Palladium, along with platinum, rhodium, ruthenium, iridium and osmium form a group of elements referred to as the platinum group metals (PGMs). Platinum group metals share similar chemical properties, but palladium has the lowest melting point and is the least dense of these precious metals.
In 2007, Russia was the top producer of Palladium. Russia has 44% of the world’s productive capacity of palladium. South Africa comes second with 40%. Canada comes third with 6%. The United States comes fourth with 5%. The commercially most important deposits from which palladium is produced are found in the Norilsk–Talnakh complex in Siberia (Russia), the Bushveld Igneous complex in South Africa, Sudbury Basin complex in Ontario (Canada), the Stillwater complex in Montana (USA), and the Roby zone ore body of the Lac des Îles complex in Ontario (Canada). Palladium is also produced in nuclear fission reactors and can be extracted from spent nuclear fuel, though the quantity produced is insignificant.
Palladium has widespread use in manufacturing. One in four goods manufactured today will contain palladium or the palladium will play a key role during their manufacturing process. This explains the taxing demand on the precious metal and its rising costs. Over half of the supply of palladium goes into catalytic converters. Catalytic converts up to 90% of harmful gases from auto exhaust (hydrocarbons, carbon monoxide and nitrogen oxide) into less harmful substances (nitrogen, carbon dioxide and water vapour). Therefore, palladium is an ethical investment considering its leading role towards diminishing pollution and toxins. In 2010, palladium-catalyzed organic reactions were recognized by the Nobel Prize in Chemistry for outstanding innovation. Demand for palladium has increased by over 100% the past two years alone.
Palladium is found in many electronics including computers, mobile phones, multi-layer ceramic capacitors, component plating, low voltage electrical contacts, and SED/OLED/LCD televisions. Palladium is also used in dentistry, medicine, hydrogen purification, chemical applications, photography, jewellery, art, and groundwater treatment. Palladium plays a key role in the technology used for fuel cells, which combines hydrogen and oxygen to produce electricity, heat and water.
Palladium has been recognized as a precious metal in jewellery since 1939. Considered at the time an alternative to platinum or white gold, however if current trends continue as they have, Palladium could very well surpass the value of gold in no more than five years. As recently as September 2001, palladium was actually more expensive than platinum and rarely used in jewellery also due to the technical obstacle of casting. However the casting problem has since been resolved and its use in jewellery has increased because of a large spike in the price of platinum. Prior to 2004, the principal use of palladium in jewellery was as an alloy in the manufacture of white gold jewellery, but, beginning early in 2004 when gold and platinum prices began to rise steeply, Chinese jewellers began fabricating significant volumes of palladium jewellery. Johnson Matthey estimated that in 2004, with the introduction of palladium jewellery in China, demand for palladium for jewellery fabrication was 920,000 ounces, or approximately 14% of the total palladium demand for 2004—an increase of almost 700,000 ounces from the previous year. This growth continued during 2005, with estimated worldwide jewellery demand for palladium of about 1.4 million ounces, or almost 21% of net palladium supply, again with most of the demand centered in China.
Investing In Palladium
Palladium is traded in the spot market with the code "XPD". When settled in USD, the code is "XPDUSD". It is listed on the London Stock Exchange as PHPD and the New York Stock Exchange as PALL. You can also traditionally invest in Palladium by buying bullion coins and bars.
Signs point to palladium being a sound investment. Considering that palladium price peaked near US$1,100 per troy ounce in January 2001 (approximately US$1340 in 2009 dollars) driven mainly on speculation of the catalytic converter demand from the automobile industry. Today, that speculation has become reality, meaning it’s very likely that palladium could not only hold at $1340 USD in the near future, but will most likely surpass that number in spades. In addition, the demand for automobiles today in countries such as China and India are much higher than in January 2001. Palladium’s value has already increased by over 200% since January 2008. Today palladium is trading for approximately $820 USD.
This is an investment that simply cannot be ignored. The returns have been higher than Silver and the demand is higher (although the supply of Palladium is higher than that of Silver). Gold has just recently tanked to $1340 USD while Palladium continues to rise. Palladium will most likely surpass gold in the next five years. The only issue is trading Palladium with bullion could prove difficult as not all dealers show the precious metal it’s proper respect, however such attitudes are rapidly changing.
-Donovan D. Westhaver
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