For Your Consideration Gold, Oil, etc...

For Your Consideration: Palladium

The average person has no idea what the hell palladium is. You can’t blame them. It’s used by nearly everybody, but in something that nobody gives much thought to. Catalytic Converters. If you have a fossil fuel powered car, you have a catalytic converter. The quick explanation, for those that don’t know, is that the catalytic converter helps clean the exhaust from an engine before releasing it out into the air. It’s the main thing that cuts down on your car’s “emissions” Palladium is one of the main 3 metals used in the manufacture of the converters (the others are platinum and rhodium).

What does that have to do with investing? Well, the price of the metal itself has gone up nearly 60% since August. When the guys you see on financial news talk about precious metals as an “investment” they typically only focus on gold, possibly silver, and occasionally platinum. Palladium isn’t really even spoken on-air. It’s the red-headed stepchild of precious metals, typically trading at a massive discount to the other 3. When gold was going nuts in 2009 and reached over $1,900 an oz, palladium was trading at less than 1/3 of that. While the other 3 are typically looked at as the only “precious”metals, palladium could easily be used (and often is) interchangeably with platinum. It’s a commodity with incredible industrial application that doubles as a precious metal.

Here’s the crazy part: palladium is about 30x more rare than gold and about 15x as rare as platinum. Right now, after this massive run up, palladium is trading near $1,330 per oz. (an all-time high) Gold is about $40 less per oz. That seems to make sense regarding it’s rarity, but it hasn’t traded at a premium to gold in over 15 years.

We can speculate all day long on the exact reason palladium is up where it is, but the overriding theory at the moment is that it’s a product of the tensions the US, Russia and China. Russia is the top mining producer (followed by South Africa) and we’ve all seen what’s going on between the US and them. China and the US are duking it out in the trade wars and in what looks to be a type of hoarding holding pattern. China is now the world’s largest motor vehicle market with about 332 million in 2018, but they have A LOT of room to grow when you consider the population and middle-class upward mobility. America has about 932 vehicles for every 1000 people, China has only about 173. So it’s a pretty safe bet to say, China wants a ready supply of the metal for manufacturing usage.

If you think that palladium has already topped out after the 60% run and there can’t be much more left we’ll leave you with this:

Last time palladium surpassed gold in price/oz, it ended up rising to about 4x the price of gold. Right now we’re just over 1…

palladium to gold ratio
Palladium to Gold Ratio (Stockcharts.com)

Here’s why palladium just hit an all-time high

Top Palladium Producing Countries In The World

The Biggest Palladium Producers

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