Palladium May Be the Most Valuable Precious Metal, But Gold and Silver Still Outshine It
If someone had told you last August that palladium would one day be more valuable than gold, you probably would have laughed out loud. Yet here we are, with palladium just barely edging out gold as the world’s most valuable precious metal. From a low of $845 last August palladium has been on a tear in recent months, currently sitting at around $1,335 per ounce.
Palladium’s major industrial use is in automobile catalytic converters, with automotive demand responsible for about 80-90% of global supply. Catalytic converters used to contain platinum, but platinum’s high price and the ability to substitute with the much cheaper palladium got many automakers to switch and substitute platinum with palladium, at least for gasoline-powered cars. Now the tables have turned.
Much of palladium’s price rise is due to tight supply and fears that further Russian sanctions may cut off Russian palladium exports. Russia produces approximately 40% of the world’s palladium. Then there’s hope that China’s automotive sector may see some recovery from the Chinese government’s stimulus measures.
Finally, there’s just some good old speculation. With such a meteoric rise in price in just a few months, metals traders are betting and hoping that there’s still some room for growth. Automakers need 18-24 months to shift from palladium to platinum in catalytic converters, so palladium demand shouldn’t diminish anytime soon.
Despite all of that, palladium still isn’t a great choice for the average investor. Due to its much more extreme price volatility in comparison to silver and gold, investors stand to lose a lot of money. And with electric cars becoming more and more popular, the outlook for palladium demand by the automotive industry is weaker and weaker in the long term.
Gold and silver, by comparison, are always in demand by investors looking for a safe haven and a store of wealth. They’re not subject to price declines due to falling industrial demand, and they’ll still be maintaining their value decades into the future. So if you’re tempted to buy into flashy new it-metals like palladium, just remember that all that glitters is not gold.