Most investors look at gold or silver bars when buying precious metals. However, there have been other, more profitable metals to invest in. Palladium has seen its price increase by around 500% over the last decade. Palladium has undeniably been an exceptional opportunity for investors.
The value of palladium is critical because of the metal's industrial applications. But with geopolitical tensions increasing and global economies facing the fallout of war, should investors be worried about palladium supply?
Why Is Palladium So Valuable?
Almost 85% of the demand for palladium comes from the auto sector. Its industrial applications are virtually limitless. Palladium is more valuable than platinum due to its rarity. Russia is known for being one of the largest producers of palladium in the world. Almost 40% of the world’s total palladium mining comes from Russia.
Reasons for the Palladium Price Hike
Earlier in March, palladium price increased to over USD 3,000 per ounce. The spot price of palladium surged up 8.4% to USD 3,008.74 per ounce. The price surge was previously this high in May 2021, when flooding at the largest palladium mine in Russia caused concerns over palladium supply shortages from Russia.
As long as the Russia-Ukraine war continues the price of palladium will remain high. International sanctions on Russia are increasing and affecting businesses. This will eventually disrupt trade, especially when it comes to the supply of palladium.
The Russian conflict with Ukraine as well as western sanctions are raising fears about the impact on the supply chain of palladium. In 2021, Russia mined and processed an estimated 74,000 kilograms of palladium, which is equal to around 2.4 million troy ounces. Investors fear that the ongoing crisis will create a deficit in supply of the precious metal.
Palladium Supply Fear Has Receded
Within a relatively short period, however, new reports show that fears surrounding palladium shortage are receding. This is because of the peace talks that have begun in spite of the ongoing crisis.
Negotiation talks between Russia and Ukraine have given hope to global investors. Therefore, there may not be as severe a disruption of palladium supply as initially feared. Demand for the precious metal has spiked in a short amount of time, and this has also impacted the price of gold. Investors have been hedging their savings in gold to protect against rising inflation and also against the unpredictable outcome of these peace talks.
Even though the price of palladium has recently receded, the metal is likely to remain volatile for the moment.
Conclusion
Every factor and scenario regarding the price and supply of palladium depends on how the future of Russia and Ukraine turns out. Nevertheless, palladium's demand will continue to rise and investors continue purchasing the rare metal. For more information regarding the precious metal, visit Suisse Gold.
