Palladium vs. Gold: Which Is Better?

Palladium vs. Gold: Which Is Better?

While gold may be the best known and most popular precious metal for investors, some investors may be looking for something more. Gold’s performance is almost boringly stable over the long term, which is great for investors looking to maintain the value of their investments over a period of time. But sometimes precious metals investors want to make significant short-term gains too. That’s where other precious metals can play an important role in diversifying investors’ portfolios and helping them grow their wealth.

Most precious metals investors are aware of silver as an alternative to gold, and the fact that silver often makes greater gains percentage-wise than gold does. But few investors branch away from silver and gold and look to other precious metals such as palladium. By failing to think outside the box, they could be costing themselves significant amounts of potential gains. Investors who haven’t looked at the palladium price vs. gold price may be shocked to find out that palladium is now more expensive than gold.

What Is Palladium?

Palladium belongs to what is known as the platinum group of metals: platinum, palladium, rhodium, ruthenium, iridium, and osmium. Palladium was only discovered in 1803, and it is a relatively rare silver-colored metal that is about 15% denser than silver.

Palladium ore deposits are very rare, with only a handful of mines around the world containing palladium, including in South Africa, the United States, Canada, and Russia. Russia produces about 40% of the world’s supply of palladium.

Palladium has numerous industrial uses, most importantly in automobile catalytic converters. But it’s also used in electronics, jewelry, and dental applications. Because of palladium’s tremendous rise in price in recent years, it’s getting a lot of attention from investors who otherwise would only think about investing in gold.

How Does Palladium Compare to Gold?

Gold is significantly denser than palladium and has been used by consumers and trusted by investors for thousands of years before palladium was even discovered. For much of that time, gold was also far more valuable than palladium. But things have changed.

Thinking about investing in palladium vs. gold used to not even be a consideration. But changing market conditions have driven the palladium price significantly higher than the gold price this year, with palladium reaching nearly $1800 per ounce last month. That’s a significant gain over the palladium price at the beginning of the year, which was just under $1260 per ounce.

Gold’s price has risen this year too, but not nearly as much as palladium has. That might make investing in palladium a tempting thing for many investors. But the use cases for palladium vs. gold are far different.

Gold is a good fit for investors who want consistent value and growth over time but who also want stability. Palladium has seen tremendous growth, but it has also seen some tremendous falls in price. Historically it has been far less valuable than both gold and platinum, and future trends in industrial use of palladium could send its price back down again.

What Drives the Price of Palladium?

The major factor that drives the price of palladium is its use in automobile catalytic converters. With ever more stringent automotive emissions standards, catalytic converters have to become ever more efficient.

For years platinum was the dominant metal used in catalytic converters, but it was expensive, as expensive as or more expensive than gold. Palladium was comparatively cheaper, so many companies began to make the switch to palladium in catalytic converters instead of platinum.

But that increased demand for palladium caused the price to rise, and now palladium is more than twice as expensive as platinum, and even more expensive than gold. Since it can take years for car manufacturer supply lines to switch from palladium to platinum and vice versa, most companies are sticking with palladium despite the high price, which should keep the palladium price elevated for years to come.

Palladium is also the preferred metal used in gasoline engines, while platinum is still used in diesel engines. With the Dieselgate scandal in the US and Europe dampening demand for diesel engines, demand for gasoline engines has risen, providing a further impetus for the palladium price to rise.

What Affects the Price of Gold?

Unlike most other metals, the primary demand for gold comes from jewelry and investment demand. The most recent data for gold shows that jewelry demand made up about 40% of global gold demand. Much of that jewelry ends up in countries like India and China, where individuals have traditionally purchased gold jewelry, and not coins and bars, as their primary source of gold investment. The Indian wedding season, in particular, sees a dramatic boost in gold demand each year.

Demand for non-jewelry gold as an investment, whether in the form of coins or bars, makes up another 35-40% of global gold demand. Industrial use in technology products forms about 8-10% of demand, and the remainder of demand comes from central bank gold purchases, which in recent years have reached record levels.

Investment demand is largely driven by concerns about the economy and the state of the financial system. Anything that might affect the economy negatively, weaken the dollar, or result in more inflation generally results in an increase in the current gold price. Given the numerous economic and geopolitical factors governing safe-haven investment demand, it’s safe to say that investor demand for gold will increase in the coming years, as will the gold price.

Palladium vs. Gold: Which Works for You?

Even when the gold price increases, however, it’s not as volatile as palladium. Its increases are more measured and steadier, and it increases for longer stretches of time. The palladium price, on the other hand, is driven by speculative demand from investors and industrial users, with some companies stockpiling huge amounts of palladium to try to protect against future price increases. So when it comes to deciding between palladium vs. gold, investors have to do some thinking.

Those investors who intend to hold onto their precious metals investments for 10-20 years or longer are probably going to be more interested in investing in gold. Over the past 20 years, gold has been the second-best performing asset around, more than doubling the annualized gains of stocks over that time period. For long-term asset protection, gold can’t be beaten.

Investors with a more short-term focus, or those who don’t mind switching up the allocation of their investments and moving from gold to palladium or vice versa, might be more interested in investing in palladium. Short-term price increases in palladium can provide rapid amounts of wealth appreciation in a short period of time. Just this year palladium has increased over 40% in price, a phenomenal result. Investors can always decide to invest in palladium for short-term gains, then convert their holdings into gold later on.

That’s made easier by investing in a precious metals IRA, which allows investors to hold precious metals in an IRA and make gains tax-free until they decide to take a distribution. Investors can even perform a gold 401(k) rollover, rolling over existing assets from a 401(k), 403(b), TSP, or similar account into an IRA that can invest in precious metals. That means that instead of having to choose palladium vs. gold, investors can easily invest in both.

Make Investments With Expert Advice From Goldco

If you think you’re ready to begin investing in precious metals, whether it’s gold, silver, palladium, or something else, give the experts at Goldco a call today. Their years of experience in helping investors just like you protect and grow their investments through purchasing precious metals can help you navigate the process with quickness and ease.

Don’t miss out on any more potential gains by sitting on the sidelines and wondering what if. Put the power of gold and palladium to work today to help your investment portfolio grow to its maximum potential.

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