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Why Is Palladium More Expensive than Gold?

Currently, palladium is among the four most precious metals in the world, and its low supply has driven its price way up.

Palladium, which is used in pollution control devices in cars and trucks, has doubled in value in the last two years, and has surpassed even gold in price.

What Is Palladium?

Palladium is a white metal that along with rhodium, iridium, osmium, and ruthenium make up the platinum group of metals. About 85 percent of all palladium is used in the exhaust system of cars and help turn toxic pollutants into carbon dioxide and steam water.

This metal is also used in electronic and dentistry devices and also in jewelry. Palladium is mostly mined in Russia and South Africa and is usually obtained as a byproduct from mining platinum or nickel.

Why Is Palladium So Expensive?

The supply of palladium does not meet the growing demand for this precious metal. The usage of palladium has grown exponentially since governments have taken stricter measures with regard to pollution and have mandated car manufacturers to use this metal more than before.

For example, in Europe, people tend more to purchase gas cars compared to diesel cars, since gas cars contain palladium and would thus create less pollution.

Why Is the Supply of Palladium Limited

Since palladium is a byproduct of platinum or nickel’s mining process, then its supply will not match its price or demand growth. In fact, it is predicted that this year, much like almost the past decade, the production of palladium will be less than its demand.

This has helped increase the price of palladium more than ever, and why it is now being trade at a price even higher than that of gold.

 

Gains and Losses of Palladium Price Increase

It goes without saying that the increase in the price and demand for this precious metal is a good news for miners in South Africa who mine palladium along with other metals like platinum.

However, on the other hand, as the price of palladium grows, car manufacturers have to pay more for car parts that incorporate this metal.

Is Price Instability a Feature of Palladium?

The short answer is yes and it needs to be mentioned that this price instability is not limited to palladium. Precious metals, especially the ones that are used by the car industry, have experienced astronomical price increase in the past when the demand outgrew the supply.

For example in 1990s due to the lack of supply and high demand for platinum, its price increased as much as 500 percent. At the same time, rhodium experienced an increase of about 4000 percent.

So it can be seen that price increases for precious metals are a recurring event.

Is There an Alternative for Car Manufacturers?

Perhaps as the price of Palladium increased, car manufacturers might start looking into using other alternative sources. However, it is unlikely that such an event could take place soon.

However, car manufacturers are not looking for an alternative to palladium, but an alternative to the entire fundamental idea of car itself. The answer is electric car.

More and more electric cars are being designed and manufactured so that palladium is no longer needed to alleviate the pollution made by cars.

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