The latest trends in precious metals trading and investment are favouring Palladium. It is a move away from the stereotypical investment in other metals. It not only makes for an enticing trade but also adds diversity to your portfolio. What makes one reluctant to invest in the white metal is the lack of understanding of its prices.
One look at the 12-month chart of the commodity and you hear alarm bells ringing. The prices went from AUD 2195 to AUD 4262, and back within this time. It’s unnerving but, we are here to help you understand what causes these price fluctuations. When you know what factors affect this metal’s prices in Australia, you will be confident with your investment in it.
On the demand front, the fluctuations are caused by various factors ranging from industrial demand to interest rates. The white metal is used primarily in the auto industry. Some other applications include jewellery, dental crowns, hard disks, and fuel cells.
With interest rates in Australia and most western countries at record lows, cars’ demand is looking up. This, in turn, will impact the demand for the white metal.
Thrust From Environmental Standards
As each day passes, there is a strong thrust toward stricter environmental laws. This has resulted in a crackdown on emissions and an increased demand for petrol and hybrid vehicles. Since the metal is used as a catalyst to reduce emissions, its demand will soar.
Prices of the metal follow the fundamental laws of economics. So if demand is high and supply is limited, prices soar, and vice versa. About 85% of the global supply is controlled by South Africa, Russia, and Zimbabwe. There are a few resources in Western Australia and the Northern Territory, but they are still in their nascent stages.
Few Local Players
Until recent times, there was no dominant player in the white metal mining industry. A few companies, like Artemis Resources, Platina Resources, Panoramic Resources, and Podium Minerals, have ventured into extracting and processing Palladium. Due to the lack of local supply, a majority of industries depend on imports. Import prices are subject to volatility due to geopolitical factors.
The U.S.A. is the largest importer of the metal, and its tensions with Russia may cause prices to soar. Similarly, any geopolitical issues in South Africa and Zimbabwe will disrupt supply and price hikes. These countries have been known to have constant labour disputes and frequent changes in mining regulations that can delay or pause in supply.
Finally, trader speculation in spot and futures markets impacts the price of the precious metal. The delivery-based demand and supply of the metal may vary from the demand and supply in the derivatives segment, resulting in price fluctuations. When the global economic outlook is weak, there will be a sell-off in the metal because traders will foresee a dip in industrial demand.
Palladium is the newest metal on the block when it comes to trading and investment. The price of the metal, like other precious metals, is determined by many factors at a local and global level. Knowing how these factors affect the price will help you formulate sound investment strategies.
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