Is it worth investing in palladium?

8.08.2022
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Currently, many stock exchange traders offer their clients to try themselves as an investor in securities, metals, oil, etc. What is the reason for this? Earning income based on exchange rate volatility does not always meet the investor’s expectations, especially in the context of the coronavirus pandemic, when in fact no one knows how the dollar and other world currencies will behave in relation to each other. When the risks are too high, you need to use other ways to save and increase capital, namely securities and precious metals. Many people wonder: “Is it worth investing in palladium?Let’s take a closer look at it.

Palladium has become a real discovery for conservative investors in recent years. Prices for this precious metal have increased significantly, which was extremely happy for traders who decided to invest in palladium. The value of the metal has increased significantly over the past few years, no one expected such a turnaround.

If we look at the data for the last few years, we can conclude that the price of palladium is moving in an ascending line. For example, in August 2018, the price of an ounce of metal was approximately 900 US dollars, by the end of the same year, the price per ounce was 2300 US dollars. This means that those investors who placed bets on palladium in 2017 received a return of 200%. These days, only bitcoin can boast such profitability. Despite the fact that the peak value of palladium was recorded in February 2020 at around 2680 US dollars, it continues to grow even during the coronavirus pandemic. Therefore, the answer to the question “Is it worth investing in palladium” is unambiguous: in the near future, this trend will not change.

investment in palladium

The demand drivers for this metal are somewhat similar to those in the silver market. What does it mean? On the one hand, palladium is the same protective asset as gold and other precious metals, and on the other hand, it is actively used in industry. Palladium is necessary for creating catalytic converters of exhaust gases for cars. Due to the fact that environmental standards are being tightened all over the world, the demand for neutralizers is constantly growing, which makes investing in palladium very attractive and profitable.

What are the pros and cons of investing in palladium?

In 2018, palladium managed to overtake gold in value, and in 2019 it became more expensive than gold. It is hard to believe, but the fact remains that even the crisis of 2020 did not affect the interest in palladium. While the value of gold has only begun to approach the $ 2,000 mark, the value of palladium has long since “crossed” it. In Russia, one of the main recipients of funds from the sale of this metal is the company “Norilsk Nickel”, about a third of its revenue is provided by palladium.

In addition, the increase in palladium prices is due to the forecast of a shortage that may occur in the coming years. Despite the fact that investments in palladium and its production yield stable profits, its production is limited, which does not allow us to fully meet the requirements of environmental standards. For example, South Africa, where the largest palladium production is located, cannot increase its capacity due to a lack of financial resources. South Africa is now one of the most affected countries by the coronavirus, as the number of patients here has already exceeded 1 million people. For this reason, economic activity in the country has significantly decreased, resulting in a structural shortage of this metal on the world market.

A shortage of palladium has been observed on the market for several years, so the shares of Norilsk Nickel do not lose their value. Experts believe that the rise in prices is also caused by speculative activity. If you decide to invest in palladium, then be sure to take these aspects into account. Major analytical agencies simply believe that the structural deficit of this precious metal will not disappear in the coming years, so investing in palladium can be potentially profitable.

Is it worth investing in palladium?

investment in palladium

The prospect of investment depends on how the economy recovers. If there are positive trends, then metal prices will receive support. Investors who want to make capital investments in palladium can use several options.

First — you can buy futures with different maturities on exchanges. Details of each contract can be found on the official websites. The big advantage of this solution is that the dynamics of futures instantly reflect the movement of the palladium exchange rate, and the trading leverage allows investors with experience to increase the profit indicator. In addition to the advantages, the solution also has disadvantages. Such exchanges have low liquidity, so there are often cases when a trader cannot quickly close an order due to an insufficient number of counterparties during a sharp jump in the exchange rate.

The second option is to purchase ETFs. ETF funds are exchange-traded funds that have an underlying asset in the form of stocks, bonds, metals, etc., under which securities are subsequently issued. The value of an ETF depends directly on the value of the underlying asset.

A physical palladium ETF means that the fund’s assets are backed by real metal held at HSBC Bank. Potential investors can make investments in the fund on the New York Stock Exchange. The only drawback of this solution is that a commission of 0.6% is charged for management.

There are also funds whose assets are represented by palladium and platinum in equal shares. This diversification provides investors with protection in case catalyst manufacturers want to replace palladium with more affordable substitutes, such as platinum. By choosing this investment option, the investor bets on the adoption of environmental standards.

is it worth investing in palladium

The third option is to buy shares of palladium producers. For example, if you buy shares on the Russian market, it is the company Norilsk Nickel, in Ukraine the leader is the company Argentum. Palladium is not the only metal that the company produces. Norilsk Nickel produces platinum, copper, and nickel. Due to the fact that palladium accounts for a third of Norilsk Nickel’s revenue, the company automatically becomes one of the beneficiaries of increasing the metal’s value. You can become a shareholder of the company by purchasing shares on the exchange platform or by investing in tokenized assets.

The fourth option is to invest in metal through a crypto exchange. Despite the fact that there is a lot of talk around the crypto exchange, today it is one of the most convenient ways to invest in palladium. You will not need to purchase a physical volume of metal or a share in the fund, just become the owner of tokenized assets, the exchange rate of which coincides with the value of the metal itself.

This solution will save the investor from:

– additional expenses;

– management fees;

– various commission fees, etc.

In addition, the resulting profit can be invested in other profitable assets.

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