3 Key Trends In Palladium Trading For 2021 – Including Insight On Chinese Demand


Learn How to Start Trading Palladium Today
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In this guide, we explain the main reasons why some traders choose to trade palladium and what experts think about the commodity.

Read on to find out how to trade palladium through different financial instruments, and what alternative precious metals are on the market with regulated brokers.

In a hurry? If you want to get started trading palladium, here are brokers and bullion dealers available in to consider:

Disclaimer: Availability subject to regulations.
Between 74-89% of retail investor accounts lose money when trading CFDs.

Why Do People Trade Palladium?

Investment products focused on palladium are relatively new compared to other precious metals such as gold and silver.

Traders might consider purchasing palladium for the following reasons:

  1. Bet on Automobile Demand
  2. Bet on Supply Constraints
  3. Bet on Investment Demand
  4. Portfolio Diversification

Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.

Palladium’s Use In The Automotive Industry

The automobile market is the most critical industry for palladium.

Investing in the commodity is a way to bet on surging demand for automobiles in emerging market countries such as China and India.

Similarly, the low-interest-rate environment in the United States and Europe should bode well for the automobile industry. Low rates mean affordable access to credit markets. Since most buyers finance automobile purchases, rates play an important role in determining demand.

As long as rates remain near historically low levels, demand for cars and the catalytic converters that go in them should remain strong.

Betting on Palladium Supply Constraints

With three-quarters of the global supply of palladium coming from two countries, there is a real possibility for supply shocks in palladium production.

The United States is a large importer of palladium and has a recent history of tensions with Russia. Should Russia curtail its exports of palladium, the price of the metal could soar.

Similarly, labor disputes in South Africa or new mining regulations could lead to supply disruptions and higher prices.

Portfolio Diversification With Palladium

Most investors have the vast majority of their assets in stocks and bonds. Commodities such as palladium provide a way to diversify and reduce the overall risk of portfolios.

Where To Trade Palladium

If you are looking to get started trading palladium and other precious metal commodities, here’s a list of brokers available in to consider.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 74%-89% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you can afford to take the high risk of losing your money.

Ways To Trade Palladium

Investors have several options for gaining exposure to palladium prices:

Trading MethodStorage Costs?Security Costs?Expiration Dates?Management Costs?Leverage?
Palladium BullionYYNNN
Palladium FuturesNNYNY
Palladium OptionsNNYNY
Palladium ETFsYNNYN
Palladium SharesNNNNY
Palladium CFDsNNNNY

*Storage costs are passed on to investors in the form of management fees.

What Are Palladium Bullions?

Physical bullion, such as bars or coins, is the most direct way to invest in palladium. However, investing in bullion requires a secure storage facility.

Ultimately, the cost of this storage and the low value-to-weight ratio could make holding physical palladium an impractical proposition.

Russian rubel palladium
A 1993 palladium coin of 25 Russian Rubles. Image via Central Bank of Russia, Public domain, via Wikimedia Commons

How To Trade Palladium Futures

The Chicago Mercantile Exchange (CME) offers a contract on palladium that settles into 100 troy ounces of the commodity.

The contracts trades globally on the CME Globex electronic trading platform and have a variety of expiration months.

Futures are a derivative instrument through which investors make leveraged bets on commodity prices.

How Do Palladium Futures Turn Profitable?

If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, the contracts are physically settled by delivery of palladium. 

Investing in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.

What Are Palladium Options on Futures?

The CME offers an American-style options contract on Palladium Futures.

Options are also a derivative instrument that employ leverage to invest in commodities.

As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.

Options buyers pay a price known as a premium to purchase contracts.

An options bet succeeds only if the price of palladium futures rises above the strike price by an amount greater than the premium paid for the contract. To learn more about how options work, see our Options Trading Guide.

What Are Palladium ETFs?

These financial instruments trade as shares on exchanges in the same way that stocks do.

The ETFS Physical Palladium Shares (NYSEARCA: PALL) invests in physical palladium that it stores in secure vaults:


Palladium Company Shares

There are many publicly traded companies that have some exposure to palladium prices.

While investing in companies can be a leveraged way to gain exposure to palladium prices, many of these companies have significant exposure to other precious metals.

In addition, factors such as company management and the overall stock market can also affect these investments:

CompanyCurrent PriceListingsFounded
Norilsk Nickel

nornickel-logo



OTC, London, Frankfurt, Berlin1993
Anglo American Platinum Ltd

AngloAmerican-logo
OTC1995
Platinum Group Metals Ltd

PGM-logo
NYSE2002

How To Trade Platinum CFDs

Another way to trade in palladium is through the use of a contract for difference (CFD) derivative instrument.

CFDs allow traders to speculate on the price of palladium without owning the asset. To better understand CFDs, see our CFD Trading Guide.

Some regulated brokers worldwide offer CFDs on palladium. Customers deposit funds with the broker, which serve as margin.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

Should I Trade Palladium?

Traders who want to invest in palladium may consider purchasing it along with a basket of commodities that includes other precious metals, base metals (i.e., copper, nickel, lead, and zinc), agricultural commodities (i.e., dairy, meats, and grains), and energy.

Purchasing a basket of commodities helps protect investors from the volatility of any individual commodity. It also adds overall diversification to a stock and bond portfolio.

Palladium spot prices have been hitting all-time highs this year, nearing $3,000 per ounce.

Are Palladium Prices Likely To Rise In The Future?

There are three specific trends that could raise palladium prices in the years ahead:

  1. Chinese Demand
  2. Investment Demand
  3. Energy Costs

Chinese Palladium Demand

China is the top consumer of palladium and could increase its consumption in the years ahead.

The Chinese economy has experienced a recent slowdown, although there are signs this may be coming to an end. Investing in palladium is one way to bet on a resurging Chinese economy.

Palladium Investment Demand

The proliferation of ETFs has exposed more investors to precious metals. As the gold and silver trade becomes crowded, investors could seek new ways to gain exposure to precious metals.

Palladium could benefit from this trend.

Energy Costs To Produce Palladium

Higher energy costs make mining an increasingly challenging business. As fuel and electricity costs rise, more mining operations could close or consolidate.

This should produce higher palladium prices.

Risks Of Palladium Trading

However, investors should also consider the risks of investing in palladium:

  1. A Global Recession: A global recession could weaken Chinese and US automobile demand.
  2. Cheaper Substitutes: Cheaper substitutes could replace the demand for palladium in catalytic converters.
  3. Global Economic or Political Control: Global economic or political turmoil could strengthen the US dollar and weaken demand for precious metals and other commodities.

Expert Opinions On Palladium

Most analysts who follow the palladium market pay attention to its price relationship with platinum.

One expert sees reasons for optimism about the palladium market compared to platinum.

What Does George Gero Think About Palladium?

Palladium expert George Gero

Palladium is powering on with the demand for more vehicles. There’s more need for palladium, which cannot be reclaimed as easily or as often from junked automobiles as platinum.

George Gero, Managing Director at RBC Wealth Management, New York

However, another leading analyst sees reasons for caution.

Palladium Outlook By A Carsten Menke Analyst

Baer believes that while the rising market share of gasoline-powered vehicles is a positive, the future presents challenges for palladium prices:

Palladium expert Carsten Menke Julius Bar

Diesel’s share of the European auto market is falling and the flip side of that is gasoline’s share is rising. Chinese car sales supported palladium, but there will a reality check as tax incentives are removed. In Europe and the United States, car sales look to be peaking.

Julius Baer, Analyst at Carsten Menke

Further Reading

If you want to know more about palladium before trading it, see our guide on How Palladium Is Produced.

We have other precious metal trading guides on the likes of gold, silver, and platinum. Other base metal trading guides on Commodity.com include copper, zinc, nickel, steel, and iron ore.

Still confused about which instrument to trade palladium with? Jump back up to our breakdown on ways to trade palladium, or see the live palladium spot price chart for yourself.

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