For precious metal investors, diversification presents some intriguing possibilities. The most prominent one, of course, is venturing into other kinds of investments, some of which may be potentially more lucrative and risky, while others are simply complements to the existing parts of a given portfolio.
Other investors, however, want to keep their diversification choices strictly within the family—the precious metals family, that is. They prefer to consider other kinds of precious metals, with silver and platinum representing two of the most popular choices.
There are other possibilities, however, and palladium is one of the most intriguing. Very few mainstream investors know how it works—many, in fact, don’t even know what it is—but palladium has gained a bit of a reputation in the precious metals community.
With that in mind, let’s explore the world of palladium with an eye on determining if it’s a good addition to your precious metals IRA portfolio and if you happen to be using your pension or retirement funds.
What Is Palladium?
We’ll start with a basic definition. As a precious metal, palladium is frequently compared to platinum. It too is used in a variety of industries, including chemical and electrical. Palladium also turns up frequently in jewelry, and palladium has dental applications as well.
Palladium is mostly found in South Africa and Russia, and there are also deposits that are located in the US and Canada.
The Palladium Market
Business-wise, the world of palladium is very small indeed, with only a handful of companies around the world involved in the manufacturing and production of palladium on a global level.
Most of the commercial demand for palladium comes from the automotive sector. It’s a primary element in the manufacturing of catalytic converters, which are a crucial car part when it comes to minimizing pollutants and the release of carbon-based gases into the atmosphere.
This part of the palladium market has undergone some fascinating shifts in the last couple of years. While the automotive market as a whole has been hurt by issues pertaining to the continuity of the supply chain, demand continues to be high for palladium due to the fact that the worldwide supply has been in decline for some time now.
That demand is expected to grow. China is currently undertaking a national program to reduce a considerable pollution problem, while the US going through an analogous process to deal with climate change. That means a greater need for palladium, so investment-wise there are no issues with demand.
How to Invest in Palladium
For those who know the precious metals market or are willing to do some self-educating, palladium represents a solid choice. It can add diversification to a portfolio, but the tricky element of this addition is finding a financial entity that knows the companies that mine, produce and sell palladium. That entity must also have the knowledge and wherewithal to be able to soundly offer palladium as an investment.
Companies that are involved in this market include North American Palladium, which is now part of Impala Canada after Impala’s recent acquisition. Most of that company’s production is conducted in Canada and South Africa, which makes it a safe choice given the recent setbacks Russia has suffered in Ukraine that could reduce the world supply even more.
The primary market for palladium is the Aberdeen Standard Physical Palladium Shares ETF, which is listed as PALL. This exchange is backed by physical holdings, so it offers access to pure holdings of palladium.
If you are going to add palladium to your portfolio, it’s important to remember that it’s a bit more volatile than most precious metals due to the tight supply.
The market hit price highs for over $2,700 per (troy) ounce in 202o but has yet to recover from a downturn, with current prices just over$2300 per ounce.
Most market analysts expect palladium to be a solid performer based on the continuing high demand, but they also expect price tension to continue.
One good way to look at palladium is to understand that its prices tend to move with the rest of the precious metal market, so if you have a stable, well-performing portfolio that’s based on precious metals, palladium is a solid choice if you want to add another element and take on a bit of additional risk.