What Is Palladium, Its Uses, How to Invest in the Metal

What Is Palladium?

Palladium is a shiny, silvery metal used in many types of manufacturing processes, particularly for electronics and industrial products. It can also be used in dentistry, medicine, chemical applications, jewelry, and groundwater treatment.

The majority of the world's supply of this rare metal, which has the atomic number 46 on the periodic table of elements, comes from mines located in the United States, Russia, South Africa, and Canada.

Understanding Palladium

Palladium is an important component in electronics, and it is used in many new technologies, such as fuel cells. As a commodity, it has drawn the attention of investors because it is not easily substituted for other metals. For example, the element is an important component of catalytic converters. Palladium, platinum, rhodium, ruthenium, iridium, and osmium form a group of elements referred to as platinum group metals (PGMs).

Palladium is 30 times rarer than gold. This rarity affects its price on commodities markets and the metal reached record highs of more than $2,981 in February 2022. The record low of $41.70 was set in August 1977.

In 2021, humans mined more than 200 metric tons of palladium. Russia produced the most at 80 metric tons. South Africa was second with 74 metric tons, and Canada ranked third with 17 metric tons. The United States produced 14 metric tons and Zimbabwe produced 13 metric tons.

The price of palladium hovered around $100 to $150 per ounce from 1986 to 1996 before spiking in 2001. Historically, the price of palladium was more volatile from 2001 to 2016 compared to previous periods. It then started to steadily rise and surpassed the $1,500 mark in February 2019.

History of Palladium

William Hyde Wollaston discovered palladium in 1802. It was an accidental discovery when he dissolved platinum in a nitric acid and hydrochloric acid mixture. Wollaston named the residue he found after the asteroid, Pallas. He did not announce his fortunate discovery to the world but rather sold it privately, marketing it as the next silver.

Other scientists believed that palladium was just an alloy of other metals, forcing Wollaston to publicize his discovery to the Royal Society of London. As it became popular, palladium was used in the treatment of tuberculosis but had too many undesirable side effects and its use in the treatment of the disease was stopped.

Palladium began being used in jewelry in 1939 but it was not until the late 1980s that the popularity of palladium grew. Automakers began using it in catalytic converters and today it is used in a wide array of products and industries, including dentistry, watchmaking, computers, photography, electronics, and the purification of hydrogen.

Benefits of Palladium

Jewelers first incorporated palladium into jewelry in 1939. When mixed with yellow gold, the alloy forms a metal stronger than white gold. In 1967, the government of Tonga issued circulating palladium coins touting the coronation of King Taufa Ahau Tupou IV. This is the first recorded instance of palladium used in coinage.

Metalworkers can create thin sheets of palladium down to one-two hundred fifty thousandths of an inch. Pure palladium is malleable, but it becomes stronger and harder once someone works with the metal at room temperature. The sheets are then used in applications like solar energy and fuel cells.

The largest industrial use for palladium is in catalytic converters because the metal serves as a great catalyst that speeds up chemical reactions. This shiny metal is 12.6% harder than platinum, making the element also more durable than platinum.

How to Invest in Palladium

Investors can gain exposure to palladium in a variety of ways. One of the easiest ways to do so is to invest in palladium-focused exchange-traded funds (ETFs) that track palladium bullion, such as the Sprott Physical Platinum and Palladium Trust (SPPP) or the Aberdeen Physical Palladium Shares (PALL). These ETFs hold physical palladium, providing the benefit of not actually having to store the metal for yourself but still getting exposure to its value.

The opposite way of investing in palladium is by purchasing physical bullion itself. With this comes the cost of having to store and transport the physical metal.

Another option to investing in palladium is to purchase the stocks of companies that are involved in the palladium business, usually its mining and sale. In this case, it can be difficult to focus just on palladium as mining companies typically mine a multitude of metals rather than just one, so you will be getting exposure to more metals than just palladium.

The Bottom Line

Palladium is a metal found primarily in Russia, South Africa, and Canada. It is stronger than platinum and has a wide range of uses, from dentistry to automotive to manufacturing to electronics. The price of palladium has increased significantly since its widespread use in the 1990s. Investing in palladium can be done through purchasing it physically as well as through ETFs.