Platinum and palladium are both members of the platinum group of metals. Their prices tend to move in tandem, and they have many of the same uses in industry. However, investors often have trouble deciding if they should invest in platinum or invest in palladium, and this article should help make the choice clearer.
Deciding to buy platinum or palladium depends on your risk tolerance and your economic outlook. Platinum and palladium are sophisticated precious metals investments that require you, the investor, to make informed calculations about where you think the economy is going. Right now, palladium looks like the better investment.
What Moves the Prices of Platinum and Palladium?
The spot prices of platinum and palladium are determined by three main factors: the automobile industry, jewelry demand, and investment demand. These factors will determine prices of the two metals.
Both platinum and palladium benefit from a strong automotive industry because they are used to make catalytic converters in cars. This means that when car sales are up, the prices for both metals tend to follow. However, palladium is more reliant on its industrial use than platinum is, and that is because platinum is popular in jewelry.
Jewelry demand is something that can greatly benefit platinum prices but may not have much of an effect on palladium prices. Palladium is - for the most part- an industrial metal. And while it is sometimes used in Jewelry, platinum is more suited for decorative use because of its greater durability and density.
Should You Buy Platinum or Palladium?
Theoretically, the key factor that should guide your decision to either buy platinum or palladium is your risk tolerance. The spot price of palladium is significantly more volatile than the spot price of platinum, and this means palladium can be expected outperform platinum in bull markets but should be expected to underperform in bear markets.
Here is a chart that compares the performance of platinum and palladium over the last six months - as of Mary 2017. The metals are represented by the ETFS Physical Palladium/Platinum ETFs.
Clearly, palladium has outperformed platinum by a wide margin. And this is probably because the metal is benefiting from both its automotive industry demand and its demand for investment and speculation. Surprisingly, over the long term, palladium has also hugely outperformed platinum in terms of price appreciation – not only in good times but bad times as well!
In fact, palladium has been the best performing precious metal of this decade.