While many retail investors tend to choose gold and silver as their first investment option, they often overlook their less popular cousins — platinum and palladium.
Just like silver, these two metals derive much of their value from industrial uses, and could therefore make for an interesting addition to a well-diversified portfolio.
Platinum and palladium come from the same group of metals (Platinum Group Metals, also known as PGM) and are nearly identical to the untrained eye.
How are palladium and platinum similar?
- Both are critical in many industries, from computers to optical fibers. And, crucially, they are used by carmakers to reduce harmful vehicle emissions.
- Both are much rarer than gold and silver. All of the platinum ever mined could potentially fit inside of an average U.S. citizen's garage, while palladium is 30 times more rare than gold.
- Both have the potential to rise in price. This is mostly due to their rarity and growing industrial demand. Since early 2016, palladium prices have risen an astounding 400% due to the metal’s chronic under-supply.
What is the price outlook for palladium and platinum?
Frederic Panizzutti, leading expert on precious metals and managing director at MKS Dubai, says:
Platinum: “We expect investment demand to increase throughout the year as platinum is almost half the price of gold and far behind palladium, and will remain an attractive and relatively “inexpensive” alternative. All parameters are pointing towards a perfect storm for platinum.”
Palladium: “The automotive sector shall further recover and the catalytic demand for palladium is set to further increase especially with the ongoing tightening of emissions standards … Some speculative sporadic short-lived interest could result in sharp rallies followed by corrections. We expect 2021 to be another very volatile year for palladium.”
Should investors choose palladium or platinum?
Thanks to their rarity, increasing industrial demand, and price growth potential, both metals could make an interesting choice depending on one’s investment strategy and risk tolerance:
Investors looking for price stability and eager to avoid large dips could choose platinum, as the metal is more stable than palladium.
However, those ready to ride the price wave and potentially benefit from price rallies could buy palladium.
Finally, those looking to really diversify their portfolio while improving their exposure to precious metals could choose to invest in both.