In free market economies, supply and demand is the primary enabler
for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a
trade in the palladium market some of the basic fundamentals that you should consider are:
1. Demand The manufacture of auto catalysts contributes to half
of palladium’s global demand. New emission regulations have resulted in increased demand from the global auto industry.
In the electronics industry there has been growth in palladium use in PC’s, cell phones, LCD TV’s, and digital
equipment. Palladium demand has also increased in “green” technologies such as fuel cells, and water and air treatment
equipment. Overall, palladium demand rose by 7% in 2007 and is expected to have risen by 5% in 2008.
2. Jewelry Demand Jewelry demand for palladium is most often used for setting diamonds and other stones.
Palladium is increasingly being used as the alloy of choice to make white gold. Traditionally white gold is made by alloying
gold with nickel. However, due to a common allergic reaction, nickel was banned in jewelry by the European Union in 2000.
Other countries may soon follow.
3. Supply Unlike gold and silver, palladium
is only mined in a few countries. The major producers are Russian and South Africa. Since the mid-1980s palladium mine supply
was on the rise due to increases in South Africa. However, in 2007 mine production started to decline. Due to declining mine
production and increasing demand palladium oversupply has been dropping steadily, and may soon be deficit.
4. Russia Russia is the largest palladium producer in the world. Almost all its palladium
is produced by Norilsk Nickel which also produces large amounts of copper, nickel, cobalt and other commodities. Until the
mid-2000’s, actual output levels were state secrets. Now Norilsk Nickel and other Russian palladium producers release
information on production, reserves, inventories and other data. This has allowed for greater transparency and reliability
of Russian palladium supply estimates.
These are just some of the basic fundamentals
to keep in mind when you are considering a trade in the palladium market. The geographic concentration of palladium production
makes it a very volatile market. Therefore, before opening up a commodity account to trade palladium you should consult with
a licensed commodity broker that follows the palladium market to discuss investment strategies.
