While it's often overlooked as a form of investment, palladium has displayed exponential gains over the past decade and continues to show good promise for growth. The most direct way to invest in this precious metal is to buy palladium bullion. Read this detailed overview to learn more about palladium bullion as an investment tool.
What Is Palladium Bullion?
Palladium bullion comes in coins, bars and ingots. It serves as an alternative for investors who want to protect themselves against inflation, market uncertainty, currency devaluation and geopolitical risk. It's an appealing investment option because it's easy to store, allowing you to own a real, physical asset with little hassle.
Palladium is a precious metal that offers unique and potentially lucrative trading opportunities. Besides being a form of investment, it's also an industrial metal that's mainly used in autocatalysts that control emission levels in gasoline-powered vehicles. In addition, palladium has been discovered and mined in only a few unstable areas around the world, making it far scarcer than gold and silver. Consequently, its price tends to be significantly more volatile than gold and silver prices, which creates unique opportunities for speculative investment.
Palladium bullion is most commonly traded in the following forms:
- Palladium bars: If you want to buy palladium at the lowest price per troy-ounce, the best thing to do is to invest in palladium bars. Containing 0.9995 fine palladium, these bars usually weigh between 1 ounce and 100 ounces. Each bar bears the hallmark of the refiner to certify its purity and weight and reduce the risk of counterfeiting. Palladium bars can be easily transported, stored and traded, allowing you to keep them as part of your personal possession.
- Palladium coins: Palladium coins are a good option if you want to purchase palladium in smaller or more divisible amounts. These coins offer the same 0.9995 palladium content, but they come in smaller sizes that are easier to divide, hold and trade.
When and Where Did Palladium Bullion Start, and How Has It Expanded?
Palladium bullion doesn't have the historical background that gold, silver or platinum bullion possesses. The earliest palladium coins were produced in Sierra Leone in 1966, and Tonga began issuing coins made from the same metal the following year. Since the 1960s, the United States, Canada, Russia, China, France, Portugal, Australia and Slovakia have minted palladium coins. However, only some of these coins were palladium bullion coins, while the others were special commemoratives. The following are a few notable palladium coins from around the world:
- Canadian Palladium Maple Leaf: First issued by the Royal Canadian Mint in 2005, the Canadian Palladium Maple Leaf coin is the official palladium bullion coin of Canada. This 1-ounce coin has a face value of 50 Canadian dollars. It's a legal tender coin with backing from the Canadian government for face value, purity and weight.
- American Palladium Eagle: As the United States' official palladium bullion coin, the American Palladium Eagle has been in production since 2017. It's a 1-ounce coin with a face value of 25 USD[1].
- Chinese Palladium Panda: China struck this 1-ounce palladium coin in 1989 as part of its Chinese Panda series, which also includes gold and silver coins. Issued in very small numbers, this coin has a face value of 50 Chinese yuan.
- Russian Palladium Ballerina: First minted in 1989, the Russian Palladium Ballerina coin depicts a ballerina in different poses. It comes in 1/4-ounce, 1/2-ounce and 1-ounce versions, which have face values of 5 rubles, 10 rubles and 25 rubles respectively [2].
How Has the Favorability of Palladium Bullion Evolved Over Time?
After the automotive industry began using palladium to reduce vehicle emissions in the 1980s, some people began to see promise in the precious metal as a form of investment. However, there have been mixed opinions about palladium because it's mostly mined in Russia and South Africa [3], two countries that are prone to political instability. Although it has been extremely volatile over the past two decades, palladium has grown to become one of the most expensive precious metals in the world.
Over the years, the favorability of palladium bullion has been as inconsistent as the performance of the palladium metal. With its rapid growth in recent years, palladium has been gaining favor with an increasing number of investors. Its high demand and great potential to increase in value make it especially appealing to investors who are looking to diversify their long-term investments. It's also a good option for people who want to store wealth and hedge against inflation, thanks to its high monetary value.
What Factors Sustain Palladium Bullion's Performance?
If you're planning to invest in palladium bullion, it's important to know the factors that can impact its performance:
- Palladium demand in the automotive industry: The automotive industry accounts for about 85% of the worldwide demand for palladium [4]. As such, large vehicle markets, such as the United States and China, have a big bearing on the performance of the metal in any form.
- Geopolitical concerns: Any interruptions to the production of palladium in Russia and South Africa can lead to palladium price fluctuation. Examples of such interruptions include power supply problems, political instability and sanctions.
- Strength of the U.S. dollar: Typically, suppliers buy palladium with U.S. dollars. A drop in the value of the dollar can be a disincentive to suppliers, resulting in a decrease in the metal supply and consequently an upward price movement.
As the palladium market is expected to continue experiencing a supply deficit, now is an opportune time to invest in palladium bullion. When purchasing palladium coins or bars, it's essential to get them from a reputable dealer. Make sure you're completely comfortable with the price and the terms of the sale before you buy.
Article Sources
1. CoinNews. '2020-W $25 Uncirculated American Palladium Eagle Released,' https://www.coinnews.net/2020/09/24/2020-w-25-uncirculated-american-palladium-eagle-release. Accessed September 30, 2020.
2. METALSWIRED. 'Russian Ballerina Palladium Coin,' https://www.metalswired.com/kids-coin-corner/fact-sheets/russian-ballerina-palladium-coin. Accessed September 30, 2020.
3. BBC. 'More precious than gold: Why the metal palladium is soaring,' https://www.bbc.com/news/business-51171391. Accessed September 30, 2020.
4. Bloomberg. 'What Is Palladium? It's Suddenly the Most Precious Metal,' https://www.bloomberg.com/news/articles/2019-10-28/why-palladium-is-suddenly-a-more-precious-metal-quicktake-k2ap4ryc. Accessed September 30, 2010.
