One of the platinum group metals, palladium is used extensively as an industrial catalyst and is a key component in the manufacturing of automotive catalytic converters. Palladium is also essential in the jewelry industry…and is one of the three most used metals (along with nickel and silver) which can be alloyed with gold to produce “white gold.” It is also used in dentistry, watch making, and in the production of surgical instruments and electrical contacts.
In the autocatalyst industry, palladium is currently a lower-cost substitute for the more expensive alternative, platinum. As this is written, palladium sells for around one-half the price of platinum. But that has not always been the case. In late 2000 and early 2001, for example, due to supply disruptions and a resulting panic by auto manufacturers (most notably, Ford Motor Co.), the price of palladium reached an all-time high of nearly $1,600 an ounce, approximately the same price as platinum at the time.
Over half of the world’s annual supply of palladium comes from Russia…and the amount and status of Russian palladium supplies are state secrets. In the past, Russia has routinely withheld supplies of palladium from world markets for its own political and/or economic gain, resulting in very large and very fast fluctuations in palladium prices.
It is this historical range of prices, and the price differential between palladium and platinum at any given time, that gives palladium its attractive investment potential. The price of palladium has been, and could again be, extremely volatile, providing investors with a significant opportunity for speculative profit.