Palladium Continues its Battle With Gold – Introduction
Last week, gold was briefly passed as the most important precious metal in the world by palladium. This was the first time in decades that this has happened. This article will look at the two metals and conclude with what I believe is the way forward.
Gold and palladium are classified as precious metals. They are both found deep within the earth’s crust and are mostly mined by large companies who can afford the process. Most of the metals are found in countries like Russia, Zimbabwe, and South Africa. The two metals also have similar composition.
This is where the similarities end. In the real world, the metals have different uses. Gold is mostly used as an investment product. Most of the gold that has been mined in the world has been bought by banks, investment companies and central banks. They are then stored in bullions. The biggest holder of gold is the United States. A tiny percentage of the mined gold is used in the manufacture of jewelry and other ornaments.
Palladium on the other hand is classified as a platinum group metal (PGM). This is because of the close relationship between it and that of platinum and other PGMs. As a precious metal, a tiny part of it is used in the manufacture of jewelry. More than 60% of it is used in the automobile industry. In this, it is used as a catalytic converter. The goal of this is to reduce the emissions.
In the catalytic conversion industry, the metal is used mostly in diesel cars. A common misconception among novice investors is that as the price of palladium soars, manufacturers will then turn to platinum. While platinum is a metal very similar to palladium, it is very expensive to make it an ideal catalytic converter for diesel cars. It is mostly used in the gasoline vehicles.
In recent years, countries from Europe have passed fresh fuel standard goals. These goals have led to more demand for diesel cars. This is because diesel cars are usually more efficient than gasoline cars. These fuel standards have also been replicated in China. All this has fueled the demand for the metals. At the same time, the supply has not been very consistent. This has led the price to soar by almost 50% since October.
As the price of palladium soars above gold, there is a likelihood that more investors will start buying it more than gold. This is because of the fact that it could replace gold as the next valuable precious metal. For example, a person wearing gold jewelry will start feeling a bit inferior to one wearing palladium jewelry. This will lead to an increased competition between the two metals in a battle that will likely be won by palladium.
Platinum on the other hand is at risk. Its price has lagged that of palladium for more than two years and is now trading at below $800. This is because the demand for gasoline cars has reduced, the supply has increased sharply, and the fact that the future of transport is changing rapidly.