Why is Palladium not as popular as gold? Will That change in 2021?

by Josh Biggs in Finance on 14th January 2021

Gold is one of the most well-known assets on the planet. The precious metal is highly prized for its value, beauty, luster, and liquidity, as buyers and sellers across the world all know about the allure of gold. 

However, few people know precious metals are more valuable and rarer than gold that is available as an investment option to everyday people. 

Palladium is one of these metals. Palladium is 30 times as rare as gold due to its limited scale of mining compared to the yellow metal. However, the price of Palladium did not surpass gold from 2001 to early February 2019, after rising more than 50% from its August 2018 price. 

While gold has maintained relatively static in price over the past several years, Palladium has enjoyed a massive surge over recent memory and still holds strong future potential. Looking at these figures, many wonder why the ‘white metal’ is not as popular as gold even though Palladium is a good investment

One of the main reasons why Palladium toiled in obscurity is due to trust. Gold has been prized and desired by consumers for many generations. Palladium was only discovered in the early 1800s and was not widely traded until very recently. 

Precious metal investors often seek out the ‘sure thing and will opt for a known metal like gold or silver, rather than one like Palladium that has more niche uses (for example, in catalytic converters). Palladium has also seen some stark price falls amid its price surges, which has drawn investors away from the metal towards other stable options like gold.

The reason? Palladium prices are primarily driven by the automotive industry since the metal is an integral part of the catalytic converter. Gold prices are not tied to a particular industry’s prospects and often rise as concerns over the world of traditional finance grow. 

Stringent automotive standards helped drive up the price of Palladium as converter manufacturers needed more of the metal in order to help create more efficient technology to comply with regulations. This caused the price of the metal to rise. 

However, some speculate the advent of electric vehicles and other innovations will lead to a shift away from catalytic converters and subsequently bring the price of Palladium down. 

What Will 2021 Bring For The Price Of Palladium?

The new year looks to only bring stronger prospects for Palladium. Tightening emissions legislation in nations like China and India, even amid the coronavirus, keeps driving up demand for the metal. 

Some worry about the price prospects for Palladium since a few manufacturers are trying to swap out Palladium for platinum, a cheaper and somewhat similar metal. These decisions do not look to impact the price of Palladium in 2021 due to a few factors. 

It is very costly and time-consuming to certify new architecture for vehicle models, and the process needs to be carried out precisely in order for cars to be sold. Even if a manufacturer started the process today, it would most likely take one to two years to complete the substitution process for the metals. Manufacturers would also have to ensure the characteristics of platinum would match Palladium enough for the specific process. 

Much of the world’s palladium mining occurs in South Africa, a nation plagued with political instability and uncertainty that has inhibited extraction of the precious metal – driving up prices. 

Rolling blackouts and other electrical infrastructure issues are still a problem in the African nation as of late 2020. Analysts predict the price of Palladium will still remain strong as the nation struggles with electricity rationing since the ability of miners to work will be greatly reduced. 

The Future Of Palladium

The spotlight only grows with Palladium as more people realize the metal’s value and immense potential. Price prospects look strong for 2021 and beyond due to sustained demand for the metal.

Categories: Finance