Palladium's Security as an Investment: Is it Safe to Invest In?
Usually, when people think of the phrase "precious metals" as investments, they often think of only three things. Ask a typical investor which metals constitute investment precious metals and you will get the big three. The big three, of course, are gold, silver, and platinum.
The reality is that almost any industrial metal can be considered as a precious metal. It can be considered an investment option. Of course, industrial metals are so heavy like copper, lead, and tin that it wouldn't really make much sense to consider them as investment options on the same level as gold and silver. Why? They just weigh too much.
1 oz of lead, tin, and copper just don't hold the candle to 1 oz of gold, silver, or platinum. Price is a very important factor when trying to define a precious metal. After all, a precious metal must be precious. Make no mistake about it. Industrial metals like copper and iron are also precious, but you need tons of those materials to approach the ounce value of gold or platinum.
Many investors have discovered one candidate as a great precious metal diversification option for the investment portfolio is palladium. Maybe you haven't heard of this metal before. This metal is actually quite popular. Its popularity is increasing, especially in car manufacturing. Here are just some of the reasons you might want to consider palladium bullion as an investment.
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Palladium as an Investment Vs Gold or Silver
Keep in mind that bullion doesn't have to take the shape of those stereotypical gold bars that you see in the movies. Those are called gold bullion, but the modern gold bullion looks like a gold coin or a small metal square.
Precious metal bullion doesn't have to weigh a lot and it doesn't have to be a hassle to move around. The same goes with palladium bullion. There are quite a number of attractive palladium bullion coins out there. Of course, these palladium bullions aren't legal tender. You can't just go to a store and buy stuff with your palladium bullion coin or square.
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The Rarity of Palladium
One of the biggest factors of favoring palladium bullion as an investment option is the fact that it is much rarer than gold, silver, and platinum. Because this is the case, the price tends to be much higher than gold, silver, and platinum. This can be a good thing and a bad thing. It's a good thing in the sense that you are almost sure that palladium will always be worth a lot of money in the future because of its sheer rarity. It's a bad thing because a precious metal can be so rare that either its industrial uses would tend to focus on less expensive substitute materials or investors would side step it entirely because it's just so rare that there really isn't much room to move in terms of speculation.
You have to understand that palladium bullion as an investment must be considered in like of how other people look at investment options. An ideal investment option should go up and down. You might be scratching your head and thinking that you want your investment to only go up in price. That's true, but there has to be volatility for there to be a market for that particular investment option.
If you are engaged in a particular investment that moves sideways or moves up, but incrementally, and is priced very expensively, chances are it wouldn't be an attractive investment option as something that goes up and down in fairly regular spikes. This means that a lot more investors will play with that particular volatile investment and there will be a lot more volume.
See also: Most Precious Metals on the Market
Palladium's Very Strong Industrial Base
If you ever bought a car in the United States, you bought something with palladium in it. Palladium is an ingredient in the catalytic converters of modern automobiles. Catalytic converters are required by law because they cut down on the pollution cars produce.
Since there are millions of cars being produced for the US market every single year, you can see that there's a huge demand for palladium. If you match this with its relative rarity, you can understand why it's so much more expensive than platinum and gold. However, its high price is a two-edged sword.
The demand for cars will never go away; however, the demand for palladium might come down especially if manufacturers of catalytic converters switch to a less expensive metal or compound. This is always a threat whenever you're dealing with very expensive raw materials like palladium, platinum, and gold. There will always be a demand for a cheaper alternative.
Another great reason you should consider palladium bullion as an investment is the fact that its use as jewelry is rising very fast. You have to remember that people are always looking to outdo each other in the world of luxury. If you're wearing gold, somebody will wear platinum. If somebody's wearing platinum, somebody else will wear palladium. So it's very important to consider the fashion aspect in your efforts at considering palladium bullion as an investment option.
While palladium's price has crashed lately, don't expect it to stay down. There are still some legs to this commodity and the down price might actually be a good sign for investors to scoop up this metal before it spikes again.
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Palladium's Supply
The great thing about palladium right now is that its supply isn't going up. It is fairly static although its spot price has been driven down due to speculation. Keep in mind that speculative pricing is all about investors betting regarding a particular investment. The low price doesn't necessarily mean the investment is bad or the commodity is bad. Market prices determine the price and it goes up and down depending on speculative activity. All things being equal, now is a good time to get into palladium.
One Drawback to Palladium
A draw to palladium is that it is a rather exotic precious metal. As more uses for it grow and as more people use it for bullion investment, expect the price of palladium bullion to go up.
Precious Metal Resources
- Coins vs. Bullion: Advantage of Each Investment's Worth
- Investing in the Best Precious Metal: Which Is the Best Choice?
- Benefits of Owning Physical Metals
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