Why Do People Think Investing in Palladium is a Bad Idea?
When investing in precious metals, investors’ first choices are often gold and silver, followed by platinum, and palladium is one of those rare metals that the majority thinks is not a good investment. Why? Historically, palladium prices have been unpredictable. Prices peaked at over $2,800 per ounce in February 2020 but fell below $1,600 a month later.
Throughout 2021, the metal lived a roller coaster, which is why many think investing in palladium is not a good idea. However, the future prospects for palladium are optimistic. In fact, analysts predict it to be the new haven that would steal the position of gold.
So, will palladium rebound after being the least-appreciated precious metal for years? Is the metal going to be the new haven for investors?
Palladium’s Rebound in 2022 After Being the Worst Precious Metal in 2021
Palladium has lived a roller coaster during the year 2021: from registering its maximum price in May, at 2,997 dollars an ounce, to plummet to the point of being the precious metal with the worst performance. However, the future prospects for 2022 are somewhat more optimistic.
Palladium is a platinum group metal whose main use (approximately 85% of global production) is the manufacture of catalysts to reduce polluting emissions from gasoline engines.
Its price has been growing since 2018 due to increased demand from the automotive industry and supply constraints.
However, this rally halted in 2021 due to the slowdown in consumption due to the scarcity of chips and because research in the automotive industry has made it possible to replace palladium with cheaper platinum to manufacture catalysts.
In 2021, the price of palladium had fallen by 26%, a figure that contrasts with the significant price increases in most commodities, with the exception of iron ore and silver.
On the other hand, according to experts, the future looks quite positive for palladium, and a significant rebound in demand is expected. The metal started picking up in 2022 with the recovery of stocks in China after a year of very low figures in terms of imports. The market again started registering a deficit from the second half of next year, which boosted prices again.
According to analysts, the rebound in car production has returned the palladium to the upward path in 2022, which is expected to reach record heights soon.
The metal reached a record-high closing price in March 2022, at $2390 an ounce, compared to the previous year’s price, which was around $1,800. However, with a slight plummet again, the current price of the metal is $1955 an ounce, which is expected to hit $2,000 by the second quarter of 2023 and $2,500 in the next year.
As for the negative structural factors faced by palladium, the main one is the increase in the process of substitution by platinum in the manufacture of catalysts for gasoline engines. In addition, the increase in electric vehicle sales also affected the main source of demand for palladium.
There were also other more pessimistic opinions from analysts who stressed that hedge fund positions were registering their worst data, while the Omicron variant of Covid-19 threatened the recovery of the automotive sector and cast doubt on mobility and economic growth.
However, the demand that was held started to flow as soon as the supply chain problems started to restore and constituted a boost for the metal price from the second half of 2022.
Start Investing in Precious Metals—Reach Out the Orion Metal Exchange Team!
In light of the current situation and the long-term forecasts, palladium is more likely to stay above $2,000 an ounce in 2023 and increase in the coming years.
In addition, considering the current highly uncertain macroeconomic environment, let’s not forget the benefits of investing in precious metals and diversifying our investment portfolios.
All you need is to reach out to a trusted precious metals investment dealer and start investing today!
Orion Metals Exchange has been offering its clients precious metals exchange services for years, where they can buy, sell, or exchange precious metals -gold, silver, platinum, and palladium-with peace of mind.
Call 1-800-559-0088 or visit the website and talk to our experts about diversifying your investment portfolio!