What are palladium and platinum and why should you consider investing in them?

What are palladium and platinum and where do they come from?

Everyone knows the connotative value of platinum in the music world, but what is it exactly? Palladium (Pd) and platinum (Pt) are chemical elements, both classified as platinum group metals (PGMs) and are considered precious metals.

The first use of platinum dates back to the pre-Columbian natives in South America, who created different artefacts with it and extracted the metal from alluvial deposits.

With the Spanish present on the continent, platinum was treated as an impurity of gold, because of its silver colour, and was thrown away. It was not until the 18th century, for platinum, and the very early 19th century, for palladium, that these noble metals were officially discovered and studied in Europe.

Today, the main sources of those elements are located in South Africa, in an area called the Merensky Reef; and Russia, in the alluvial deposits in the Ural Mountains or in Canada, in the Sudbury Basin, Ontario; as a result of an impact crater on earth. All those elements are produced as secondary metals, extracted while mining deposits of nickel and copper.

Like gold and silver, platinum was also used as currency. First by the Spanish empire in the 18th century, followed by the Russians a century later, when the latter made great strides in mining and metallurgy. But its use was not so profitable as the platinum was heavy, more expensive and difficult to mint because of its high melting point (1768 °C).

During WWII, platinum had become a strategic resource. The US government only allowed its use in military applications, like combat aircraft engines, for example, for its conductive and resistant properties. Since 1939, palladium has been used mostly in jewellery as an alternative to platinum in the global production of white gold.

Today, platinum and palladium are used as an investment or as industrial commodities. Nowadays, 80% of it goes to the car industry as catalytic converters. The rest is mostly used for jewellery and dentistry.

What is the connection between the car industry and palladium and platinum?

Both are precious metals, having an ISO 4217 currency code like gold and silver. Now, since palladium and platinum are predominantly used for their properties as catalysts reducing the toxicity of car emissions, palladium has won the title as the most valuable precious metal for the first time since 2002, leaving gold behind.

The reason behind this is mainly China. In 2016 they approved a new regulation, known as “China’s Stage 6”, and the country has since then been confronting stricter emissions rules than European countries and the US, as they have adapted to these rules already. In order to lower pollution in their cities, China has been obligated to include more palladium in their gasoline cars and trucks, reducing the emission of gases and CO2.

The car industry has been the biggest reason why the price has escalated.

With platinum, something similar has happened: the main use is as a catalyst for car engines as well and its demand has been growing, especially for diesel cars.

Why and how to invest?

Palladium and platinum are widely used in today's industry as a “must” component in pollution control devices. The sources of these natural precious metals are limited and their price has found its course and is increasing. Investing in palladium and platinum means investing in widely used precious metals.

Bitpanda Metals offers you the option, as well as with gold and silver, to invest in palladium and platinum in a digitised form to secure a fast and accessible investment opportunity for everyone. Additionally, as always, with Bitpanda Metals you benefit from ultra low fees whilst being 100% insured.

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