Palladium Key Facts and History
- The element, Palladium, was first discovered when it was extracted from platinum by William Hyde Wollaston in 1803.
- It was named after an asteroid, Pallas, which was discovered around the same time. The origin of the name is derived from the Greek goddess of wisdom.
Palladium is a suitable metal for jewelry, and dental products such as crowns, however, its primary use is currently as a component within catalytic converters in cars. Almost two-thirds are used for this purpose. It is also used to create ceramic capacitors that are found in computing devices, and within fuel cells that provide electricity from fuel.
- It is possible to find palladium uncombined, but it is more likely that it will be found within sulphide minerals or combined with other metals, such as copper and zinc.
Modern Day Statistics for Palladium
The Top Palladium Producing Countries in the World 2016 (statista)
Country - Metric Tonnes
Russia - 82
South Africa - 73
Canada - 23
United States - 13.2
Zimbabwe - 10
Other Countries - 6.6
Factors that Influence the Palladium Market
Palladium is bought and sold as a commodity and can be traded on a variety of markets. Precious metal markets can be quite volatile, as there are many factors that influence price changes in these markets. Some of these are listed below:
- Demand: The overall demand of the metal, either in its raw or physical form or through derivative financial products.
- Mine production: Changes in national production can also affect the supply of palladium and therefore the price.
- Uses. As the majority of palladium is currently used within catalytic converters and as new cars are now being manufactured with electronic fuel injection systems, they do not require catalytic converters, which will cause the demand for palladium to drop. Any usage changes such as this has the potential to dramatically affect market prices.
How is Palladium Traded
There are many methods available for trading palladium.
CME Group palladium futures and options are listed on NYMEX in New York under the ticker symbol of PA for futures and PAO for options. They are electronically traded on CME Globex. A contract size is 100 troy ounces, and contracts are traded all months with the last trading day being the third to last business day of the month.
Other exchanges include the Tokyo Commodity Exchange, and the London Metal Exchange, the latter of which works with the London Platinum and Palladium Market to deliver prices available for trading on their electronic platform. The London Platinum and Palladium market is mainly for spot delivery, rather than trading futures and options contracts.
Physical ownership of the metal is another way to be involved in palladium markets, and this is held in the form of bars and coins.
Alternatively, traders could choose to own shares in palladium mining companies. It should be noted that many of the mining companies do not exclusively mine for palladium, so there are other factors impacting the price of these shares.
Palladium ETFs (exchange traded funds) are another way to gain access to palladium markets. An example is the iShares Physical Palladium ETC, which tracks the spot price of palladium and exposes the trader purely to this market. The advantage of trading ETFs is their liquidity and the ease at which they can be traded.
Palladium - IG - CFD
Another example is the IG CFD, which is based on the NYMEX traded palladium futures contract. A minimum contract size of 1 is required for this, with the value of one pip at $100. The minimum margin required is 3.5%, therefore, in order to have open a long position in the palladium SEP-17 CFD, the minimum margin requirement is (941.70*1*100*3.5% =$3295.95). Note - live price taken from IG 30th August 2017.
Conclusion
As with most precious metal trading, palladium markets can be highly volatile. Although often neglected by traders who opt instead for platinum or gold, due to its unique qualities and uses, coupled with the fact that it is cheaper than platinum, it is a metal that should continue to be of significant interest to those who understand the market.
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