The economic climate over the last several years has certainly drawn investors towards precious metals. Inflation, political uncertainty and the global pandemic have all affected the economic climate. While most investors turn to gold and silver, platinum and palladium shouldn't be overlooked. Palladium has outperformed gold in the last few years, and platinum, trading significantly below the gold price, is viewed by many industry experts as undervalued. Let's consider why they are relevant for a precious metals portfolio.
Why Are Platinum and Palladium So Valuable?
Both platinum and palladium are crucial metals for technological industries, and in particular the automotive sector. They are part of what is known as the platinum group metals (PGMs). Both are considered rare, and Russia and South Africa are the biggest producers of both metals. Although supply remains limited and relatively fixed, demand for both metals continues to increase. This is due to demand from the automotive sector as well as the jewellery sector. The limited supply coupled with the increased demand have pushed the prices of these metals upwards over time.
Investing In Platinum Coins and Bars
Platinum is trading at a significant discount to the gold price at the moment, despite the fact that demand for the metal continues to increase. Platinum acts as a substance in catalytic converters that are used to control automobile emissions. Platinum is also critical to the defense and aerospace industry for the manufacturing of jet and rocket engines.
Investing in platinum coins and bars helps to build a strong portfolio that is likely to be boosted by industry growth as well as inflationary pressure on fiat money.
Invest In Palladium Coins and Bars
Palladium is exceptional in its ability to turn toxic impurities from automobile engines into less-harmful carbon dioxide and water vapor. The demand for palladium continues to grow for this reason, and in particular due to its ability to reduce the carbon footprint from automobiles. Most gasoline-fueled engines in cars require palladium in catalytic converters.
Palladium prices remain high, with buyers likely to invest in palladium bars or coins and hold them as a store value. In the years to come, palladium is expected to continue to grow due to the increase in demand from the automobile and industrial sectors.
The supply of platinum and palladium is scarce, and is likely to remain so. Automobile manufacturing is reduced due to the reduction in automobile demand from Covid, however, this is like to recover in the next year or two. For this reason, it may be prudent to add platinum group metals to your portfolio.