New Ideas in Palladium Investment: Analyzing Trading Opportunities Amid Supply and Demand Imbalance

What is Palladium? Why Is It Worth Paying Attention To?

Palladium is one of the most volatile precious metals in the market, due to its unique industrial properties and tight supply situation, it is increasingly attracting the attention of traders.

In 1803, British chemist William Wollaston discovered this new element in platinum ore. He dissolved natural platinum ore in aqua regia and separated shiny metallic particles—palladium—through a series of chemical processes. The element’s name derives from the ancient Greek goddess of wisdom, Athena (Pallas-Athena), hence the scientific name Palladium.

From an application perspective, 80%-85% of palladium demand comes from the automotive industry, mainly used in catalytic converters to reduce emissions from internal combustion engines. Additionally, palladium has important applications in electronics, dentistry, and metal alloys. Many white K-gold jewelry pieces on the market are made from platinum and palladium alloys.

Because of this highly industrial use, combined with limited global supply (Russia and South Africa are the main producers), palladium prices are far more sensitive to geopolitical, industrial policies, and supply fluctuations than gold and silver. This is also a key reason why it has become a hot short-term trading target.

Price Turning Points of Palladium in the Last Decade

To understand the investment logic of palladium, reviewing its historical price trends is crucial.

2017-2019: The Golden Era: This period saw a remarkable surge in palladium prices. The global auto industry responded to increasingly strict emission standards (such as China’s “China 6” and the EU’s “Euro 6”) by sharply increasing demand for catalytic converters. Meanwhile, South Africa faced intermittent mine closures due to power crises, and Russia’s capacity growth stagnated, worsening the supply-demand imbalance. Palladium prices rose from around $730/oz in early 2017 to $1,900/oz at the end of 2019, a cumulative increase of over 160% in three years, far surpassing other precious metals during the same period.

2020: Volatile Fluctuations: The COVID-19 pandemic changed everything. Global economic activity slowed significantly, and the automotive industry was hit hard, causing demand for palladium to plummet. In March 2020, prices briefly fell to $1,460/oz. However, large-scale fiscal and monetary stimulus measures quickly reversed the trend, and the automotive sector rebounded rapidly. Coupled with ongoing supply bottlenecks in South Africa, palladium prices rebounded strongly in 2021, reaching a historic high of $3,017/oz in May 2021.

2022: Geopolitical Impact: After the outbreak of the Russia-Ukraine war, concerns over disruptions in Russian supply pushed palladium prices to a record high of $4,440/oz. But subsequently, expectations of reduced demand due to the proliferation of electric vehicles and fears of global recession caused prices to fall sharply.

2023-2025: Volatile Consolidation: Palladium entered a broad trading range of $1,500-$2,200/oz, reflecting a tug-of-war between structural demand decline and geopolitical supply uncertainties.

First Half of 2025: Demand Structure Is Changing

As of June 2025, palladium prices are generally trending downward in a volatile manner. Starting from $1,140 at the beginning of the year, it briefly surged to $1,260 in March, then declined due to weakening fundamentals. In May, it fell to lows of $1,030-$1,080, and in June, despite a rebound to $1,110 driven by short covering and a weaker dollar, the year still saw a decline of over 10%.

The fundamental reason for this decline is the change in demand structure:

Global electric vehicle penetration has reached 22%-25%. According to IEA forecasts, this ratio will continue to rise. Electric vehicles do not require traditional catalytic converters, directly reducing the rigid demand for palladium. Meanwhile, growth in major auto markets like Europe and China has slowed, further weakening industrial demand.

On the supply side, although Russia faces international sanctions, it continues to export through neutral markets. Improvements in South Africa’s power supply have gradually increased production capacity, leading to more stable overall supply.

Market sentiment has shifted towards traditional safe-haven assets like gold and silver, benefiting from rising tensions in the Middle East and global central bank gold-buying waves. In contrast, palladium, due to its industrial nature, faces continued pressure from ETF holdings and net long positions decreasing.

Outlook for the Second Half of 2025: Who Will Lead Palladium’s Direction?

Based on WPIC and Citi Commodity Research’s baseline forecasts (stable supply + global GDP growth of 2.5%-3%), the average palladium price will fluctuate within the $1,050-$1,150 range. Technically, if prices reach the long-term support level of $900, a technical rebound could be triggered, offering a short-term entry point.

Future variables mainly depend on several scenarios:

Bullish scenarios: If Russian exports are blocked, South African mines face accidents, or hydrogen energy breakthroughs create new palladium demand, prices could rally short-term, challenging the $1,300-$1,400/oz zone.

Bearish scenarios: If China and Europe’s auto markets weaken further, or the dollar remains strong, suppressing commodity prices, palladium could fall below $1,000, testing the $900-$950 support zone.

Core Advantages of Investing in Palladium

Compared to gold and silver, palladium has unique trading characteristics:

High volatility and short-term opportunities. Palladium reacts more sensitively to supply and demand changes, with large price swings and high technical sensitivity, suitable for medium-short-term trading.

Inflation hedge. Palladium is priced in USD; when the dollar depreciates, it reacts positively as a commodity asset, providing a tool for inflation hedging.

Structural supply bottlenecks. Major global mines face restrictions due to strikes or underinvestment, making supply difficult to ramp up quickly. Meanwhile, demand can suddenly rebound due to geopolitical or policy shifts, creating trading opportunities.

Rigid industrial demand support. Over 80% of palladium is used in automotive catalytic converters. Even in the electric vehicle era, many traditional cars will still require palladium catalysts for years, providing fundamental support.

Practical Path for Trading Palladium

For ordinary investors, directly buying palladium futures or physical metal involves high barriers. Futures require large capital and have fixed delivery dates, necessitating closing or rolling over positions at expiry; physical buying involves storage costs and liquidity issues.

Contracts for Difference (CFD) offer a more flexible solution. Through CFDs, investors can track palladium price movements at lower costs without owning physical metal or futures contracts.

Key advantages of CFD trading:

• Low trading threshold, minimum 0.1 lot
• 24-hour trading, no restrictions by exchange hours
• No fixed delivery date, flexible holding
• Supports long and short positions with leverage
• Equipped with stop-loss and take-profit tools for risk management

When trading palladium CFDs, it is recommended to use technical analysis tools such as Moving Averages (MACD), Relative Strength Index (RSI), etc., to judge price trends and overbought/oversold conditions.

Summary: Is Palladium Worth Investing?

The core logic of palladium investment lies in its unique market positioning—unlike gold, which has strong safe-haven attributes, or silver, which has broad applications, palladium is a commodity highly dependent on specific industrial demand.

In the short term, rising electric vehicle penetration has indeed suppressed traditional palladium demand. However, uncertainties in Russian supply, South African capacity bottlenecks, and geopolitical risks still provide upward support. Within the $1,050-$1,150 range, there are opportunities for swing trading.

For traders willing to accept volatility and with good risk management, palladium can serve as a component of a precious metals portfolio, seeking profit from price differences in the short term. But investment decisions should be based on in-depth fundamental analysis and strict stop-loss discipline, rather than blindly chasing rallies.