Palladium: Get it if you can

When talking of precious metals, the names which immediately come to mind are gold, silver and platinum. There’s another one — palladium, and its gaining momentum in the global market. Palladium is a precious metal mainly used in the production of auto engines. And good news for investors — a new type of fuel-efficient engine being produced in developed nations requires more of platinum and palladium. According to commodity analysts, when developed nations recover from the recession, demand for these engines will go up and so will the demand for palladium. Russia, which holds the largest stock of palladium, is expected to benefit hugely as it will have strong control over the market. Palladium reserves around the globe are scanty and production has gone down over the last couple of years. The metal is mainly produced through two methods — underground (mining) and aboveground. South Africa and Russia are the leading producers in the underground and aboveground methods, respectively. In India, the popularity of precious metals comes mainly from their use in jewellery-making and their being considered auspicious. Gold, silver and platinum are all used in making jewellery, hence their demand in India. But most Indians are not aware that palladium is also used to make jewellery. Palladium is lighter than platinum, having about the same density as silver. It is used as an alloy when producing white gold. Thus, it too is a jewellery metal. “Gold still remains the most popular precious metal investment. It will remain at the top of investment charts in the Indian market as India mainly consists of middle class families and investment or purchase of gold is considered to be a status symbol and a sign of prosperity. Gold also has traditional and sentimental values for many Indians as it is considered to be auspicious” said Nihar Parikh, executive director of Shrenuj & Co, a jewellery-making company. Globally, palladium ETFs have been listed on stock exchanges, allowing investors to take demat possession of the metal. Another way to participate in the palladium market is by buying stocks of palladium producers. However, keep in mind that other factors such as the company management’s competence; operating strengths and future growth prospects also affects stock prices. “In India, however, palladium ETFs have not come into existence and neither can a willing investor buy palladium as its availability is low. The metal is currently priced at $510 per ounce and according to my estimates, an investor can expect 25-30% returns in the next couple of years” said Chirag Sheth, assistant vice-president at Latin Manharlal Commodities Pvt Ltd. Vijay Bhambwani, CEO, BSPLindia.com, said, “I tried buying platinum once, about two years ago, after research for my book pointed a high price appreciation potential. Unfortunately, a lack of efficient price discovery mechanism means unless a 20% appreciation occurs, you won’t make any more money than your savings bank account.”