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Buying Palladium As A Palladium Investment

The History Of Palladium

Until relatively recently, palladium was not separated from platinum with which it’s found in the earth’s crust.  Naturally occurring platinum, which is actually an alloy of metals, is commonly known as “native platinum.”  The early Spanish conquistadors didn’t recognize the value of the new white metal and discarded it during their gold mining operations.  Some early counterfeiters made coins from platinum and then plated them with gold to exchange as genuine coins.

European scientists discovered that the metal was impervious to fire, impossible to corrode, and heavier than gold.  In the early 1800s, palladium was discovered by British chemist William Hyde Wollaston.  He was able to separate palladium from platinum by dissolving the native platinum in an acid mixture, and named it after the Greek goddess Pallas.

It was almost two centuries later before palladium’s value was recognized and people began to invest palladium.  The demand for the metal skyrocketed when the U. S. government started phasing out the use of lead in gasoline, and catalytic converters became a requirement in all new automobiles.  Over the years, more countries adopted similar emission standards and the demand for palladium increased dramatically.

Why A Palladium Investment

Palladium is softer than platinum, and its resistance to high temperatures, oxidation, and corrosion prompted its use in automobile converters.  While this accounts for the majority of demand for the metal, it has many other applications.  Its conductive properties make it a viable substitute for gold in the plating of electronic parts.  It is used as an alloy with platinum in jewelry and in the production of white gold.  In the area of medicine, a radioactive isotope may prove to aid the treatment of some diseases such as prostate and breast cancer.  An alloy of palladium and other materials is used for dental bridges and crowns.

Palladium is also used in the processing and treatment of natural resources such as oil refining, water purification, and the purification of hydrogen gas.  It also has promise for potential applications in fuel cell technology.  It is used in the processing of raw materials for the manufacture of polyester, nylon, and synthetic rubber.  It is used along with platinum in photographic processing that is arguably better than that produced using silver.  More uses for this metal are being routinely discovered, so demand is expected to remain strong for those that invest palladium.

The palladium price reached a high in early 2001 and the metal is currently trading at about one-third that level.  However, the price has risen consistently since the start of the year.  Spurred by continued economic expansion in China and India, increased demand for palladium has prompted some to forecast further price rises and recommend that investors buy palladium.

Bullion As A Palladium Investment

Palladium bullion carries a stamp reflecting weight and purity, and is intended as a palladium investment for resale at a later date.  As one of the “noble metals” in the platinum family, palladium is not as well known as gold and silver for precious metal investment purposes.  However, as time has progressed and the demand has risen, many people have started to buy palladium to diversify their portfolios.  Produits Artistiques de Métaux Précieux (PAMP) and Credit Suisse palladium bars are available to buy palladium online.  With a purity of .9995, the bars are registered and can be purchased in 1 troy ounce, 10 troy ounces, and 1 kilogram weights.

Palladium mined by the Stillwater Mining Company in Montana and refined by Johnson Matthey has been minted into bars for investment purposes.  Availability may be limited to the recent cessation of production.

Types Of Palladium Coins

Several countries have minted palladium coins in the past, but most of them have suspended their limited production.  These include Portugal, France, Russia, China, and Australia.  Some of these were commemorative proof coins that were not intended to enter circulation.  Today, the Royal Canadian Mint is producing 1 troy ounce coins that are .9995 pure.  The Maple Leaf appears on one side and a sculpted image of Queen Elizabeth II on the other.  The demand for these coins is rising so you might expect delivery days.

You can buy palladium online and from reputable dealers without an online presence.  Before making financial commitments, make sure that the seller will deliver precisely what you are buying.  When you invest palladium, it’s best to deal with a company that stands behind its products and will buy back your coins at any point in the future at the prevailing palladium price.  While the Maple Leafs carry a face value, the selling price will reflect the market spot price of palladium plus a seller’s premium.  Many dealers and resellers will offer discounts on large quantity purchases.

Other Palladium Investments

If you don’t want to take possession of the actual metal, you might consider purchasing stocks in mining companies, or mutual funds and index funds that own positions in such companies.  Unlike bullion that relies totally on a rising palladium price for you to make a profit, stocks have the potential for capital appreciation and dividend payments.  While the palladium price will reflect the demand for bullion, stock prices reflect the demand for ownership in those specific companies.  The two do not necessarily move in the same direction at the same rate.  Some people believe that the only truly safe palladium investment is to own the actual metal and hold it in your possession, so this is an individual decision.

Another approach is to purchase options in palladium futures as a way to hedge your investment risk.  Options are a form of gambling on what direction you believe the palladium price is headed.  If you think the palladium price is headed up, you buy a “call,” but if you think prices are headed down, you buy a “put.”  Depending on the assumed risk that is a function of the expiration date of the option, the premium or cost of betting on the price direction is set.  A majority of traders close their positions before expiration and take any profits, rather than buy the contracts.  If you are not experienced in trading options, you should seek the advice and counsel of a reputable broker.