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.
Palladium is a very thinly traded market. 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.
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.