Recently, I have been paying attention to palladium, this precious metal investment product, and I found that many people still have some misconceptions about it. I will organize my observations for everyone’s reference.

Palladium is actually a very interesting investment target. As one of the hardest and most volatile precious metals, palladium’s investment appeal is indeed quite strong. It is mainly used in the automotive industry, electronics, dentistry, and metal alloys, with about 80%-85% of its application in the automotive sector. This characteristic is very important because it directly determines the future demand trend of palladium.

Historically, palladium has shown an overall upward trend with fluctuations over the past 20 years. Between 2000 and 2015, palladium mostly fluctuated between $177 and $1,100, mostly around $500-600. But starting in 2015, palladium entered a major bull run, skyrocketing from over $400 to above $2,800 within a few years. At that time, the Federal Reserve’s liquidity policies and the demand from the automotive industry boosted palladium’s rise.

In 2019, due to the impact of the pandemic, palladium prices rapidly plummeted, nearly halving within three months. But then, the Fed’s rescue policies brought palladium back to its peak. However, once the Fed starts raising interest rates, the glory days of palladium are basically over.

Why is palladium worth investing in? I think there are a few main reasons. First, like gold, palladium is priced in US dollars. When the dollar depreciates, palladium, as an inflation hedge, tends to increase in price. Second, the supply and demand fundamentals are very favorable. The world’s largest palladium producer is Russia, followed by South Africa, but both countries have faced declining output in recent years. Russia’s reserves are decreasing, and South Africa’s production has also fallen due to strikes and other reasons. Meanwhile, demand from the automotive industry for palladium is increasing, creating a supply shortage and demand growth scenario that is very favorable for prices. Additionally, the palladium market is relatively small; compared to gold and silver, its price volatility is greater, which presents opportunities for investors seeking higher returns.

Regarding ways to invest in palladium, there are currently three main methods. One is physical palladium, which requires actual possession, with storage costs and wear-and-tear risks. Two is futures contracts, which require higher capital thresholds and have delivery date restrictions. Three is contracts for difference (CFDs), which are the most flexible, with no fixed delivery date, allowing for two-way trading, and leverage ratios that can be adjusted freely. For most retail investors, CFDs tend to have lower trading costs and are easier to operate.

Compared to platinum, palladium has more advantageous supply and demand fundamentals—higher demand and lower supply. Although platinum has better market liquidity, palladium’s price volatility is greater, offering more profit opportunities for investors. Looking at the trend over the past 10 years, palladium’s gains far exceed those of gold, which also indicates that palladium has good investment potential.

If you want to start investing in palladium, it’s best to first clarify your investment goals. Are you aiming for higher returns, hedging and preservation of value, or just long-term holding? Different objectives will determine your choice of investment method. Also, keep an eye on overseas trading markets in real-time, because different markets may have different fees and regulations, which are important for making timely and correct decisions.