Palladium Investment in Coming Years

A beginner’s approach to precious metal investing starts with either gold or silver, depending how much money one has to work with for a first purchase. However, there are other precious metals available, and palladium is one of them.

Palladium has predominantly seen large-scale use in automotive parts, most commonly casted as casings for catalytic converters on modern combustion engines running on gasoline. Platinum is used for the same on diesel-powered engines. Granted, automotive part use doesn’t sound like a precious metal to invest in. However, a spot market price of palladium is now in the range of $750 an ounce. That makes the metal quite desirable since the same value continues to keep rising.

Palladium in 2013
As noted earlier, palladium is in demand for a number of mechanical needs. However, if the supply grows short, then the price of the metal goes up, regardless of who produces it. This supply and demand driver of precious metal value is fully expected to keep going up in 2013. There are number of reasons this assumption makes sense.

In 2011 production of palladium hit over 1.25 million ounces. That said, 2013 projections are expected to now be reduced by 915,000 ounces, leaving a remaining aggregate supply of 5.84 ounces. Overall, the world’s new supply of palladium metal used to be an average of 6.5 million ounces every year. The two major suppliers for the world supply include Russia and South Africa.

South Africa itself has been plagued with mining labor problems in multiple mining locations. Conflict between miners and mine management has led to prolonged shut down of major mining locations in the country, either reducing production significantly or eliminating it completely for the foreseeable future. The longer the strikes went, the more damaging they became to available palladium supply on the open market. This labor impact affected the market globally; South African palladium supply makes up over one-third of global supply when production is operating normally. As a result, 2013 projections for South African available supply has dropped by 6 percent.

The second supplying country, Russia, is in a similar supply contraction. Russia has been in a bit of different situation, however, selling palladium from existing surplus supply versus new metal harvesting dug up each year. This large supply was a secondary production of other mining the country engaged in during development. Rather than just dump the by-product metal elsewhere, Russia simply stockpiled the palladium ore for a future use. The storage idea paid off, especially when automotive catalytic converters started becoming a staple in gas-powered car production and clean emissions.

Unfortunately, that same palladium supply which was started decades ago has not been replenished with new mining. As a result, many market experts think that Russia’s national supply is starting to run out, again seriously impacting available market supply and related spot pricing per ounce.
Monex Live Palladium Prices

Russia used to put out for sale up to 1 million ounces of palladium annually. In 2013, that supply is expected to be a paltry 10 percent of previous years, or 100,000 ounces. The country is projected by some to only have 2.5 years’ worth of supply left at that minimal rate of consumption. Ironically, Russia is still actually mining palladium. However, the current effort is not near enough new production to offset years of consumption to available supply.

Demand Continues to Increase
In the meantime, a number of modern countries and emerging markets continue to add to the exponential growth of automotive palladium demand. Automakers are eating up palladium at a far greater rate of use than it is being produced, raising total consumption to a total of almost 6.5 million ounces in 2012. The U.S. and Japan have been the biggest players, but emerging markets like China and India are adding a substantial influence to demand as well.

Because of the rising valuation of remaining supply, palladium bullion has also been eating up available metal as well. When investors, both institutional and individual lock up palladium positions, they effectively take metal off the market. This makes it unavailable for anyone else to use. Palladium investments have boosted demand for the metal via speculation, creating a purchase expectation of 385,000 ounces for 2013. While this is a drop in the bucket compared to the automotive consumption, the effect begins to add up as more and more metal gets purchased through speculation and investments.

Methods of Buying a Position
Obviously, exchange-traded funds are often touted as a viable method for investors to hold a palladium position, just like other commodities. The ETF approach works like a stock, with an investor buying ETF shares through a brokerage similar to shares bought in a mutual fund. However, the investor doesn’t actually own the metal itself.

Physical Palladium Shares (NYSE: PALL) is the most common ETF holding available. Sprott Physical Platinum and Palladium Trust (NYSE: SPPP) offers another palladium investment option on paper.

Palladium bullion can also be bought from certain sources, allowing investors to obtain an actual metal holding versus a paper position. This can be in the form of bullion bars or the rarer option of bullion, coins. Palladium, unlike gold and silver and platinum, is not a metal often used by government mints, so it’s not the easiest bullion to find in coin and currency form. That said, some banks and precious metal institutions will create private productions of palladium bullion for investment sale. Further, both Canada and the U.S. government mints create palladium one-ounce coins for investment purchase, when supply is available. Additionally, China produces their own government coins and some smaller countries produce one-time production runs of commemorative coins as well. So there are options available. Buyers can typically find palladium coins either through larger licensed dealers, government mint sales, or private owner sales in-person or online.

In Summary
Given the current palladium market conditions and supply problems of the metal’s inventory, palladium is all but positioned to rise in value per ounce and keep rising. Investors in 2013 will pay a bit of a price to establish a position in the metal, but all signs seem to be indicating a return on investment will continue through 2013 at least. Especially given that the metal continues to be in high demand by the automotive industry, until someone comes up with a replacement for catalytic converters palladium prices don’t have a reason to fall very much. Further, the U.S. government at least is increasing emission standards, creating more reliance on catalytic converters with better designs in filtering pollution.

On the other side of the world, eventually South African mines will go back to production again, but the production time loss has already taken a toll, which won’t be offset by new production any time soon. As a result, all logical indicators argue palladium won’t fall in price anytime soon.

Those looking for good research on tracking the market patterns and available investment options in palladium can find an abundance of information at The website provides news, mining production information, investment options and resources for palladium purchasing and position building, with up-to-date data affecting the pricing of the metal worldwide. It’s also a good source for historical charts, research information, and precious metal investing advice as well. No one can predict exactly what will happen with a precious metal investment in the future. However, buyers can definitely utilize free and available research to determine the value of palladium investment along with investments.

Palladium Investment in Coming Years
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