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Investing in Palladium – Everything You Need to Know

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Why Invest in Palladium?

Investing in precious metals you would be forgiven for putting a very heavy focus on the popular names in the sector. Trading in gold and silver obviously attracts much more attention in this area, mainly due to the general level of awareness that most people have around these very common market choices. There are other precious metals that are definitely worth investing in though. One of these which is often forgotten about by retail traders, is palladium. Despite the fact this precious metal has grown strongly in recent years, and has displayed gains of more than 1,000% since 2008, it is often left aside by investors focused on the higher volume gold and silver markets.

Here we will show you what the palladium market is all about, how you can get into trading this precious metal, and why it may be a great addition to your portfolio.

The Basics – What Drives Palladium Prices?

At the present time, palladium is trading higher than gold, with both at record high points. This has shone a light on both like never before. So, what are the main factors which have driven the prices of palladium to put them at higher levels even than gold? Here are a few major ones to consider:

Auto Industry Demand – This is by far the number one influence on the prices of palladium around the world. The auto industry accounts for around three quarters of the global demand for palladium. This is due to the fact that palladium is a key component in the manufacturing of catalytic converters. This, and particularly the demand for vehicles in large markets like the US and China have a huge bearing on the price of palladium.

Geopolitical Concerns – This factor can be active on a number of fronts for palladium and is something you should investigate prior to investing. Much of the world’s palladium supply comes from Russia, and South Africa. This accounts for about 80% of the total supply worldwide. With that said, any interruptions to this supply or process, be it in the form of sanctions as Russia sometimes deals with, or power supply problems, can cause a fluctuation in prices.

Substitution – Substituting palladium for other metals within the auto industry is something which is coming under and increasing amount of scrutiny. This is in large due to the high price of palladium, and also the fact that a number of substitutes, including platinum can be used. With that in mind though, platinum is not a direct substitute that can be easily used, so car makers are still largely reliant on palladium.

US Dollar Strength – The US Dollar forex market is going through a tough time currently. This weakening dollar can certainly have an impact on palladium prices as it does on other precious metals, though the reasoning behind it may be different. Palladium is typically purchased from suppliers in US Dollars. Any downward movement in the Dollar has potential to act as a disincentive top suppliers. This can reduce the supply of the precious metal which in turn can lead to an upward price movement.

Ways to Invest in Palladium

Now that you know several of the key drivers behind the price of palladium, it puts you in a good position to get involved in buying and trading the market. There are several ways in which you can do this much trading gold or silver markets. The main points which will vary here are the liquidity, and how closely the investment is tied to the palladium price.

The most direct way to get involved in trading palladium is to purchase palladium bullion directly from a reputed mint or other trustworthy supply source. This physical purchase of the metal typically takes the form of coins, collectable coins, or bars of the metal which can be purchased at different weights. Naturally, this is absolutely tied to the palladium market prices, though you should be mindful that a small premium is generally added by the seller, and this can be a substantially more difficult palladium investment to resell quickly if the price changes.

Palladium stocks are another popular way to get involved in trading the market. This means buying stocks in palladium related companies through your broker. They are typically very closely connected to the demand and price for palladium, though you also have to be careful to understand the key metrics of the individual company performance too. If you are looking for an even higher volume market, you may choose to trade palladium options or futures contracts. These can be higher risk, but are certainly the most liquid in terms of your ability to quickly trade palladium.

Finally, if you are seeking a very well-balanced way to invest in palladium, ETFs may be a good choice for you. There are essentially baskets of stocks which you can invest in at one collective price. Investing in a thematic ETF related to palladium will give you good exposure to many of the main players in the sector, and should also hedge your risk to a certain extent if the prices do fall. These ETFs can often pay a healthy dividend too.

Who Should Invest in Palladium?

Although palladium is now at a higher price point than gold, it is still very much an investment that any type of trader can make. Like other precious metal investments, it is something you can use to add great diversity to your portfolio. It is also becoming very accessible to all retail traders thanks to being on offer from many of the top online brokers.

Your investment in palladium really depends on your risk profile. This will determine which method of palladium investment may be most suitable for you. If you are willing to take more risk and can withstand a degree of volatility, you may consider options, or futures, while a more conservative approach would be an investment in ETFs or certain index funds. With the growth in demand and price though, it is clear that more and more traders are becoming aware of the potential within trading palladium as much as other precious metals.

Palladium Historical Prices

Palladium Price

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Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

Commodities

Investing in Platinum – Everything you Need to Know

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Why Invest in Platinum?

If you are considering investing in precious metals, it is very likely that you have already looked into investing in gold, and investing in silver. These are the two best known, and most popular in terms of volume of investors who trade the two. There are others though.

One of these “other” precious metals which is often overlooked, is platinum. This precious metal actually often comes with the highest price tag of all three mentioned. This is due to the fact that it is rarer than gold, and more difficult to extract.

As an in demand industrial metal, it is another excellent choice to consider adding to your portfolio of precious metal investments. Here we will take a closer look at what moves the price of platinum, and how you can get in on the action.

What Influences Platinum Prices?

Similar to silver, and other precious metals which are frequently considered as “industrial metals”, platinum is open to many of the same factors which can lead to fluctuations in the price. Though it is a very high value precious metal, and can act as a store of value in similar fashion to gold, it is much more exposed to the laws of supply and demand as they typically apply.

Auto Demand: Platinum experiences huge demand from the car industry. This is due to the fact platinum is a key component in catalytic converters which are used to reduce the emissions of vehicles around the world. This means the price of platinum can largely move in tandem with demand from the auto industry for new vehicles.

Currency Strength: This point particularly applies to the USD rate against the South African Rand, and Russian Ruble. This is because the vast majority of the world’s platinum comes from these two nations, and is paid for in US Dollars. Therefore, a weaker dollar usually removes some incentive from platinum mining. This can decrease supply, and in the process, lead to higher prices.

Political Stability: As mentioned above, the vast majority, in excess of 75% of the platinum supply in the world is mined in South Africa, and Russia. This means that the political situation in both nations, and their relations around the word, but particularly with the US, and China as two of the world’s major buyers has vital significance. Any kind of geopolitical issues, tariffs, or trade restrictions, could have a big influence on the price of platinum.

Investing in Platinum

Having taken a look at the key factors which move the value dial in the platinum markets, if you are interested in making an investment, there are a number of relatively easy ways that you can do so:

Physical Platinum: Platinum in the form of coins and bars is definitely the most direct way to get involved in the market. Similar to the other choices though, it is decidedly more difficult to purchase platinum, with a reduced number of reputed suppliers in line with the rarity of the metal itself.

The company we recommend to buy Platinum Directly is Bullion Vault.

Platinum Stocks: This is a popular investment route where again there are several, but certainly not an abundance, of platinum stocks which you can invest in on the equities market through your broker. These are typically in the largest platinum mining and production operations both in South Africa, and North America. Some of these mining companies though, may also be involved with other metals which could leave you vulnerable even if platinum prices are on the rise.

Platinum ETFs: Platinum ETFs, just like they do in other areas of the market, provide a broader exposure to the industry. This means a platinum ETF can be an investment in mining and production companies of platinum, as well as in other areas. This is the simplest way you can become invested in Platinum, and although each ETF is different, your risks are hedged in a sense with an ETF. They are also liquid when it comes to getting in, or leaving your position if the price goes against you. Many major brokers will cater for a selection of platinum ETFs.

You could also get involved in trading platinum futures and options which are very popular when it comes to commodities trading, but as a newer investor, the less volatile methods above are recommended for your first ventures into precious metal trading.

Platinum Risks

Just as with any other form of investment, there is the inherent risk of a downturn in the market. To this end you should have yourself protected by a solid risk management strategy.

There is no doubt that platinum prices are considerably more volatile than gold, or even silver. This may mean they are not suited to every investor. Over the longer term though, they have still showcased strong returns.

Within shorter time periods of 3-5 years, platinum prices can swing a lot, and are currently at a price which is not very far from a 10-year low. This is due to a number of factors, not least the drop off in vehicle demand due to the 2020 COVID-19 pandemic. Many may see this as an opportune time to get value from the platinum market considering it has for now been temporarily displaced by gold in terms of value as the latter reaches for all-time highs.

Platinum Historical Prices

Platinum Price

Final Thoughts

While the gold and silver markets certainly grab the headlines when it comes to trading in precious metals, it is worth remembering that, although there may be a few less pathways open to doing so, an investment in platinum is still a relatively easy feat to accomplish.

Combine this with the current dip in the platinum market where it unusually sits below the price of gold, and you may have an ideal opportunity to add new diversity to your portfolio.

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Commodities

What Makes Gold So Valuable?

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Gold prices have been hovering in and around all-time highs throughout this year. If you take a look at the charts, the price of gold has also risen considerably over the years to a point where it now trades at close to $2,000 per ounce. This is almost double what it traded at just five years ago. Considering this uptick in price then, you may begin to wonder, what actually drives the price of gold to make it such a valuable commodity.

We will take a closer look at the main factors which influences gold prices, and how gold has fared over the long-term when compared with some other investments.

Factors That Drive Gold Prices

Just like any other market, there are many things which can influence the price of gold. These can be fundamental in nature, and well as psychological, but they move the market nonetheless. Here is a detailed look at the major factors at play.

Currency Strength

Referring to the impact of currency strength on gold prices is to more specifically acknowledge the influence of US Dollar strength on gold prices. Gold is priced globally in USD, and so, any move toward dollar weakness will increase the price of gold relative to other currencies.

The US Dollar and price of gold have an inverse relationship. This means that as the Dollar weakens, the price of gold rises, and vice versa. Also connected to this point, is that, when the Dollar is weaker, it increases the amount of gold which can be purchased with another currency. This tends to increase demand, and therefore the price also rises. This point is evident in 2020 as we see rising gold prices amid a falling US Dollar.

Fiscal Policy

Government fiscal policy can be a big determinant in the value of gold, and certainly work to drive it in either direction. The major tool of monetary policy which is at work here, are interest rates.

Very basically, a consistently low interest rate could see yields from traditional forms of investment fall below a certain acceptable level to investors. With lower potential returns in one area, investors are pushed toward other areas to achieve higher returns. Gold markets are often the places where investors flock to in these situations. Similarly, if the indication is given of raising interest rates, the price of gold tends to suffer as investors move out toward more interest correlated markets.

Inflation or Hyperinflation

Typically viewed and talks about as a “hedge against inflation”, gold prices tend to rise in tandem with inflation in the economy. This is often due to the fact that increasing inflation is a signal or economic growth, and is often accompanied by an increasing money supply.

Any increase in the money supply essentially dilutes the value of a paper currency, making it more expensive to own safe-haven commodities like gold. This factor is also interwoven with other points of fiscal policy since increasing inflation can also typically be a by-product of low interest rates, and accompany a drop in US Dollar value.

Hyperinflation is a term to describes an overproduction of the printing of currency which results in excessive, and out-of-control general price increases in an economy.

Supply and Demand

Due to the fact that the amount of held (already mined) gold, vastly outweighs the new supply at any given time, the supply and demand factor is often overlooked with many pointing out that gold is not impacted in the same way as other markets in this respect. That is true to an extent, however, the global demand can still have an influence on the price.

Gold is of course a big feature of the jewelry industry as well as being very much in demand within the electronics sector. An increase in demand from these areas will see an increase in gold prices at least a certain amount, and vice versa.

Economic Performance

The overall economic environment globally can have a significant impact on gold prices. This factor really encompasses many elements of all the prior factors mentioned. Gold is above all, perhaps the number one safe-haven asset in the world. This means that in times of uncertainty economically, people move strongly toward buying gold.

Naturally, this creates a rush in demand, which can lead to a spike in the price. This is the overriding factor which has led to the 2020 increase in gold prices since many investors are faced with an economic uncertainty ahead.

Risks to Buying Gold

As with investing in any market, there are always some risks to take into consideration. These same factors which act to drive gold prices higher, can reverse and have the same impact on the downside.

Looking back over the years though, gold returns have been extremely consistent. The commodity has had good and bad years, though it tends to provide a steady rate of return which has certainly outpaced most major markets in recent years. Over the longer-term though, if you are looking for cumulative growth, stocks would have far outpaced the gains of gold.

There are many ways in which you can get involved in buying gold which can also further hedge your risks. The likes of investing in gold-related stocks, and ETFs will work to manage your direct exposure to gold prices better than if you were to purchase gold bars or coins. They are also more liquid and can easily be sold quickly if the gold price does start to fall.

Final Thoughts

Overall, gold is the one asset which seems to intrigue investors time and again. It holds a certain mystique in its value and how this is determined. Having an awareness of what really drives gold prices though, can set you up to make a well-educated investment decision when it comes to adding gold to your portfolio.

If you are interested you can learn more about Investing in Gold or we recommend these two companies to buy gold:

  1. Gold Broker
  2. Bullion Vault

 

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Commodities

How to Buy Physical Gold

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If you are starting out investing in precious metals, and particularly gold for the first time, you will know that there is a number of ways that you can invest in gold. These include investments that are both intangible in that you cannot physically hold them such as stocks, and ETFs. If you are an investor that likes to have a tangible holding of your investment though, there is another way. Physical gold, also referred to as gold bullion. Here we will lead you through the process of buying physical gold, and the different types which are available depending on your needs.

Types of Physical Gold

Investing in physical gold, you will generally be faced with two options. These are gold bars, or gold coins. Depending on your needs, both can be significantly different when it comes to investments and their value.

Gold bars are the most commonly purchased form of physical gold. When bought for investment purposes, these should typically be at least 99.5% pure gold bars. What you will typically see though from investment grade gold bars, and what you should be on the lookout for when purchasing, is that the name of the manufacturer, the weight of the bar, and the purity which is typically expressed as 99.99% is stamped on the face of the bar. These will indicate the quality of the bar, and vouch for the authenticity of it.

Gold coins are another way to make a physical gold investment. You should note though that if you buy gold coins, they may not always be equal to the spot prices of gold in the same way that a gold bar would be. This is due to a number of other factors being at play.

With gold coins, these will typically not be of the same purity levels as gold bars. They typically contain 91%-92% gold. With that said, the price of coins in terms of weight, can be more than that of gold bar. This is due to the collectability which some of the coins have. Determining this collectability though is another area of expertise altogether, and if you are looking for the most straight forward physical gold investment possible, then bars are likely the best place to start.

How to Buy Physical Gold

The next question when getting involved and buying physical gold for the first time, is understandably, where can you buy it?

When it comes to this question, it goes without saying that you want to buy from the most trusted sources only. These are relatively easy to find, and typically have a strong online presence and the backing of a lot of positive reviews and credibility. In this regard, it is very important to do your own due diligence prior to buying to make sure that the dealer you are using is completely legitimate. The very first thing you need to be extremely clear on is the current spot price of gold, and avoid any dealers who seem either too good to be true, or have added huge premiums to the current spot price.

Within the US, the Better Business Bureau is a good place to start if you are looking to review or confirm the reputation of a dealer.

If you prefer to skip the homework, we recommend these two companies:

  1. Gold Broker
  2. Bullion Vault

Factors to Consider When Buying Gold

Though you are now well on your way to buying physical gold for the first time, there are still a few key points which are great to not in keeping yourself on the right track.

Size: Buying gold does not mean you have to dive straight in and purchase a 1kg, or even a 1oz bar. Gold bars come in all manner of sizes. Typically you can purchase anything from 1 gram to 1 Kilogram in weight. The key is to buy the size which is right for you. This is both in terms of your own budget, and considering resale. It is likely that smaller quantities would be easier to resell in the future if needed.

Price Premium: Make sure you shop around the various reputed suppliers of gold. All bullion purchases will have a slight premium added to the spot price, but there should be no hidden fees to contend with. This is always worth double checking before you buy.

Storage & Insurance: Now that you have bought physical gold, you will want to keep it as safe and secure as possible. This may well mean paying for another secure storage facility which is a highly recommended option, particularly if you are buying in large quantities. If you want your bullion to be properly insured, then you may also have to invest in a professional storage solution or specialized third-party insurance.

Condition: Of course when you are buying the gold, you want to make sure that it is in top condition. This is typically very well detailed when you buy from a reputable seller. Once in your possession, you will want to keep your gold in this condition. That is another advantage behind secure storage as you want to make sure your gold stays completely out of harm’s way or any scratches that could impact the value.

Historical Gold Prices

Gold Prices Real-Time

Final Thoughts

Overall, buying yourself some physical gold in today’s market is certainly more accessible than you may think. If you are the type of investor who likes to get your hands on intangible assets, then gold could be the perfect choice for you as it stays near record highs.

Once you have overcome the hurdles of finding the best gold supplier accredited by the BBB, and considering where you will store your asset, there really is nothing to stop you from making that first purchase at any size of gold bar or coin that works for you.

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