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What is Palladium?
Palladium is a chemical element that was first discovered in 1803 by William Hyde Wollaston. The metal’s symbol is Pd and its atomic number is 46. Palladium has a lustrous, silvery-white appearance and it belongs to a group of elements known as the Platinum Group Metals, or PGMs. Palladium has the lowest melting point and is the least-dense of this group of metals which also includes platinum, rhodium, ruthenium, iridium and osmium. One of the primary uses for this metal is in the production of catalytic converters.
Palladium as an Investment
Palladium has become an increasingly popular investment vehicle. Unlike gold, which is used primarily for jewelry and investment purposes, palladium is also used-heavily in modern industry. In 2019, the price of palladium overtook the price of gold, catching the attention of investors. As a hard, dollar-denominated asset, palladium can potentially provide some significant benefits to an investment portfolio. Some of the potential benefits include:
- Portfolio diversification
- Inflation hedge
- Upside price potential
- Hedge against currency weakness
- Zero counterparty risk
There are numerous ways to make investments in this metal. Investors can buy shares of companies involved in the mining or production of palladium. There are also ETFs available designed to track the performance of palladium. For investors who want the physical metal, both palladium bullion coins and bars are available for purchase. In addition to bullion coins, various proof versions are also available.
As palladium becomes increasingly popular with investors, more varieties of coins, bars and possibly even rounds may be seen.
Palladium Spot Price FAQ
Spot palladium prices can and do change, sometimes rapidly and significantly. As a global market, palladium can be influenced by both industrial demand as well as investment demand. On the industrial side of the ledger, auto demand can have a significant impact on the price of palladium as it is a key component of catalytic converters. If demand declines, prices may potentially fall and if demand increases, prices may potentially rise.
On the investment side of the ledger, palladium prices can potentially be affected by interest rates, currency markets and other geopolitical risks. Dollar-denominated asset classes like palladium may potentially rise in value as the dollar declines, and therefore may be purchased as a type of hedge.
The macroeconomic picture can also have a heavy influence on the price of palladium. During an economic boom, the metal may potentially see more industrial demand while during a recession, demand may potentially decline.
Palladium can be priced by the ounce, gram or kilogram. Prices per-ounce are what is most typically quoted. For example, if palladium is quoted at $1400, that means that the price is $1400 for a single ounce.
Spot prices simply refer to the price of the metal for delivery now. Unlike futures contracts, which designate a price to be delivered on at a later date, the spot price is how much the metal costs for immediate delivery by the ounce, gram or kilo. The spot price is typically based on the near-month futures contract with the heaviest volume.
A quote of $1400 would indicate that palladium is trading for $1400 per-ounce unless otherwise noted.
Palladium is a dollar-denominated commodity and therefore is most-often quoted in dollars. Markets outside of the U.S., however, may also choose to quote prices in the local currency. Chinese markets, for example, may quote prices in yuan.
For all practical purposes, yes. Palladium is used and traded all over the world and thus its value is going to be the same. If palladium was one price in country X and another in country Y, a risk-free arbitrage opportunity would exist.
Palladium prices quoted are simply for the metal itself, nothing else. When palladium is minted into coins, bars or other products, the cost of doing so must also be factored into the equation. Once the costs of the metal, shipping and production have been accounted for, then a dealer premium is also added.
A dealer premium is the cost added to palladium products that enable the dealer to cover the cost of doing business and to turn a profit. For example, if the price of palladium is currently at $1400 per-ounce, a single-ounce palladium bar may be priced at $1500. The $100 added onto the cost of the bar includes the cost of minting and production as well as the dealer premium.
Dealers’ ability to buy below spot and sell above spot is known as the dealer spread. This spread represents the dealer’s profit. For example, suppose you sold a one-ounce palladium bar to a dealer when the spot price is at $1250/oz. The dealer may offer you $1200 for the bar but might look to sell the bar for $1250. The $50 spread between the purchase price and the sale price would represent the dealer’s cost of business and profit.
The bid is the price at which buyers are willing to buy. The ask is the price at which sellers are willing to sell. If you are looking to buy palladium, you would pay the ask price. If you are looking to sell palladium, you would sell at the ask price. The difference between the two is known as the bid-ask spread. This spread can be a good indication of market liquidity. The tighter the spread between the bid and the ask, the more liquid the market may be.
The palladium market operates almost around the clock. Prices are in a constant state of discovery and can move quickly at times. Although the market may see quiet periods, it can also see periods of heightened volatility and large price swings.
Commodities are widely-traded vehicles for end-users, producers and investors. The pace of modern economic activity and innovation necessitated the availability and access to markets on a larger scale.
Palladium Futures and Paper Palladium FAQ
Palladium is traded on various exchanges today and it could see increasing interest as the market moves higher. Palladium futures contracts are traded that dictate the price of palladium to be delivered on at a specific date in the future. For example, if the June palladium contract is trading at $1400 per-ounce, that means that the price would be $1400 when the contract expires. The buyer would be able to pay $1400 per-ounce and the seller would be required to deliver the metal at $1400 per-ounce. Many futures markets are not delivered on these days, however, and many contracts are simply settled in cash at expiration.
The standard contract traded on the CME is for 100 troy ounces of palladium.
Yes. You can take delivery on these contracts, however, it is rarely done. There is a very specific process for taking delivery on palladium contracts and there are also costs associated with it. In addition, one can only take delivery of exchange-approved “good-delivery” products.
Yes. Investors who want to gain exposure to the metal can do so in a variety of ways. One could purchase stock of palladium mining or production companies. There are also ETFs designed to track palladium as well. Although these products may track the price of the metal, they do not provide the opportunity to own the actual metal and come with the counterparty risk associated with paper products.
Other Palladium Price FAQ
Yes. The 1 oz Canadian Palladium Maple Leaf, for example, has a face value of $50 CAD. The 1 oz American Palladium Eagle Proof Coin has a face value of $25. Although these coins are considered good, legal tender, they are not purchased for their face value but rather their metal content and even collectability.
Generally speaking, coins will be more expensive than bullion bars from a premium standpoint. This is due to a few reasons. Coins, unlike bars, are also good, legal tender. Coins may also contain more intricate details and designs compared to bars, making them more expensive to produce. For those looking to acquire as many total ounces of palladium as possible, bars may potentially provide a better value.
Palladium products are available in local coin and bullion shops as well as from online dealers. These online dealers may potentially be able to offer lower pricing and better deals. This is due to the fact that they do not have many of the costs of doing business that brick-and-mortar shops do such as property, heating/cooling, security etc. The best way to find the best deals is to compare dealers and products side-by-side.
Of course, the actual price of the desired products is first and foremost. There are other considerations as well, however. If buying online, the cost of shipping and insurance must also be factored in. In addition, different payment methods and different purchase amounts may also affect the net price. When comparing dealers, make sure to compare the same products and to factor in the payment method and any shipping or other costs. This will give you the bottom-line cost to determine what dealer is offering the best overall deal.
Yes. Palladium coins are available in both bullion and proof versions. Bullion coins may provide a lower per-ounce cost while proof coins may also potentially add collectability value.
Each dealer may have a different procedure when it comes to locking in prices on precious metals products. A brick and mortar store, for example, may set the price at the beginning of the day and adjust the price based on market movement.
Online dealers typically utilize a live price feed that automatically adjusts their prices. When buying palladium or other precious metals online, different dealers have different procedures when it comes to locking in a purchase price. At JM Bullion, when you add products to your Cart, the product prices are “fluid” and will continue to update until you advance to checkout.
Once you advance to checkout, the price is locked in and displayed on the right side of the checkout form. These checkout cart prices are frozen for 10 minutes while you complete the checkout process. If it takes longer than 10 minutes to complete the checkout process, you will have the option to approve the new, updated prices to finalize your purchase.
If you look around at online dealers, you will notice that they often have different prices listed according to payment method. Dealers will typically offer a discount for cash, check or bank wire payments and may charge more for purchases made with a credit card.
The reason for this is simple: Dealers typically operate on razor-thin margins and credit card companies may charge one to several percent to process the transaction. Dealers are not able to simply absorb this cost and therefore must charge more to cover the cost of the transaction.
Bulk discounts are available at many dealers. For example, some dealers will list prices according to size. With palladium at $1400 per-ounce, you might pay $1500 for a 1/oz coin up to 5 coins. If you purchase 5-10 coins, that price may drop to $1495. If you buy 10-20 coins, the price may decline again to $1490. The bottom line is that the larger your purchase, the lower per-ounce cost you may be able to get.
Not always, no. A collectible coin, for example, may exchange hands well-over the spot price. In that case, the dealer may buy the coin over spot and then look to mark it up further. Dealers with excess inventory could look to sell that inventory at spot or below to make room for new inventory.
Any investment carries with it the risk of loss. The price of palladium could go lower just as easily as it could go higher. When one buys an American Palladium Eagle, for example, the value of the coin may go up based on rising palladium prices, but it can also go up on rising coin premiums or collectability factors. Coin values and collectability premiums can also fall. The bottom line is, if one is looking to acquire palladium or precious metals, then paying dealer premiums is part of the process that must be accounted for.
The stock market is often viewed as an overall indication of investor appetite for risk. That being said, palladium may at times exhibit a positive correlation to stocks and at other times exhibit a negative correlation to stocks. Overall, the correlation between metals and stocks/bonds appears to be quite low. This can potentially make metals like palladium useful as a diversification tool.
Absolutely. Palladium is a natural resource that has to be pulled from the ground and processed. Any issues that could hamper mining of the metal could potentially send prices higher as supply is unable to meet demand. Worker strikes, for example, could put a major dent in production quotas.
Mining companies may also look to expand or contract their operations based on the current supply/demand equation. If the market is flooded with supply, for example, then miners may look to contract or slow operations to bring prices back in line.
The precious metals complex may at times move together and at other times may show some divergence. These metals may be driven by numerous factors but not always the same factors. Gold, for example, may be driven primarily by the dollar and investment demand, while palladium may be more focused on industrial demand.
Metals can at times exhibit severe market volatility. This is really no different than stocks or bonds, however, which both at times display significant price swings. For the patient, long-term investor, market volatility may be viewed simply as noise. In addition, unlike using leveraged paper products, the purchase of physical palladium products limits risk to the amount paid for the product. This can make it easier to stick with it during periods of high volatility and investors can stay focused on the bigger picture and long-term objectives. Of course, just as palladium can go up it can also go down. Every investor needs to determine their own level of risk tolerance.
Palladium is measured in troy ounces. Each troy ounce contains about 31.1034768 grams which is slightly higher than a standard ounce which is only 28 grams.
There are 32.151 troy ounces in one kilogram of palladium.
In the U.S., certain states charge sales tax on palladium bullion products. Depending on which state you are located in, and where you purchase your palladium, you may be liable to pay sales or use tax on the purchase. For more information on individual states, reference our local buying guide.
No. Investors today can get started with as little as $100. Fractional size bullion and coin products have opened up these investments to even the smallest of investors and can make it easier for investors to purchase on a regular basis.
Many dealers will offer sales or specials. If you are looking to acquire as much actual metal as possible, stock with bullion bars and coins. Bars may potentially offer the best total value on a per-ounce basis. Next, by as many ounces at a time as you can as dealers may offer a volume discount. Pay by check or bank wire to avoid paying credit card premiums and look for free or inexpensive shipping and insurance options.
Yes, Certain palladium products may be eligible for inclusion in an IRA account. To learn more, read our full page on bullion IRA investing.
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