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This high-value metal is tricky to source and in high demand — especially from car manufacturers. And Australia listed palladium stocks are set to benefit, with the precious metal outperforming both gold and silver in recent years.
But with a history of volatility and the future of electric vehicles uncertain, there’s no guarantee it will continue to hold its value.
What's in this guide?
What is palladium?
Palladium is a bright, silver-white metal primarily mined in Russia and South Africa. It’s typically produced as a byproduct of mining other materials, like nickel and platinum. It is one of the six platinum-group metals, a group that includes iridium, osmium, platinum, rhodium and ruthenium.
We’re most likely to encounter palladium when driving a vehicle, as nearly 85% of mined palladium finds itself in the exhaust systems of cars. It’s a vital component of the catalytic converters responsible for transforming toxic pollutants into carbon dioxide, nitrogen and water vapour. Palladium is also used in dentistry, electronics, medicine and jewellery manufacturing.
Palladium stocks are stocks from companies that produce palladium — mining companies, mostly. Unfortunately, there are few pure-play palladium stocks, as this metal is typically produced as the mining byproduct of other materials, like platinum.
Why invest in palladium stocks?
Palladium is 30 times rarer than gold and as demand for this material continues to rise, so do its prices.
The cost of palladium has been on the rise since 2016, hitting an astonishing high of US$2,714 per ounce in February 2020. For comparison, gold was trading at US$1,575.95 per ounce at that time.
Why is palladium on the rise? In short: demand. Anytime the demand for a commodity outpaces its supply, the price of that commodity rises. And palladium supplies have been unable to meet global demand since 2012.
And the good news for investors is that the demand for this metal looks like it will continue its upward trajectory. With our heavy reliance on palladium in catalytic converters and rising global pressure to ditch high-emission vehicles, car markers need more palladium than ever. And since the metal isn’t easily replaced, palladium demand is high.
The bottom line? Palladium is valuable, and trends in global demand for this metal are poised to drive its value higher still.
Risks of investing in palladium
Despite palladium’s rising price tag, this commodity hasn’t always been such a hot commodity. In fact, the metal has a history of volatility and is only valuable so long as it's needed.
While car manufacturers have yet to find a palladium workaround, a replacement isn’t exactly out of the question. And with palladium being so rare and cumbersome to produce, it’s quite possible that an alternative could be found — especially given the failure of palladium miners to meet increasing global demand.
Another threat to consider is the rising popularity of electric vehicles. The electric vehicle market is growing — fast. And this could act as a significant market disruptor for palladium since electric vehicles don’t require catalytic converters.
ASX palladium stocks
There are few pure-play palladium stocks, as most of the palladium that’s manufactured is produced as a byproduct of other metals. So if you plan to invest in this commodity, prepare to back mining companies that produce other materials too, like platinum.
Below are a list of Australian-listed palladium stocks:
What ETFs track the palladium category?
There are at least a dozen palladium ETFs listed around the world. In Australia, we have just one palladium focused ETF, alongside a precious metals ETFs which tracks palladium alongside platinum, gold and silver:
- ETFS Physical Palladium (ETPMPD)
- ETFS Physical Precious Metal Basket (ETPMPM)
Palladium performance
This graph shows the spot price per ounce of palladium.
Compare trading platforms
You need a brokerage account to invest in palladium stocks. Compare your platform options by features and fees to find the account that best meets your needs.
Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Bottom line
Palladium plays an important role in the automotive industry as a key component of catalytic converters. But its value could be at risk if a substitute metal were found to take its place.
Before you purchase palladium, review your trading platform options to find the brokerage account that can help you meet your investment goals.
Frequently asked questions
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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