New Investment Choice in Precious Metals: Analyzing the Value and Trading Methods of Palladium

Why Palladium Is Worth Paying Attention To

Palladium (XPDUSD), as one of the most volatile commodities in the precious metals market, has gradually gained attention from investors in recent years. Its importance in industrial applications continues to rise, especially in automotive manufacturing, electronics, dentistry, and alloys, with automotive catalytic converters accounting for 80%-85% of total demand. Compared to gold and platinum, the market size of palladium is relatively smaller, and while liquidity needs improvement, its price volatility far exceeds that of the other two, offering investors more profit potential.

Palladium and platinum look similar in appearance but differ in properties—palladium is slightly harder than platinum, and their costs vary. Currently, the price hierarchy is Gold > Palladium > Platinum. The name “palladium” originates from the ancient Greek goddess of wisdom, Athena (Pallas-Athena), carrying rich connotations.

Deep Changes in Supply and Demand Dynamics

The investment opportunities in palladium largely stem from its tight supply and demand relationship. Russia is the world’s largest producer of palladium, followed by South Africa, but both countries face capacity pressures—Russia’s stockpiles are decreasing, and South Africa’s output has shrunk due to strikes and other factors. Meanwhile, the global automotive industry continues to drive demand, especially in the US and China.

According to data from consulting firm MetalsFocus, the demand for palladium remains stable at around 9.7 million ounces, but the supply gap has widened to 707,000 ounces, the largest since 2018. This reduction in supply coupled with steady demand provides upward pressure on palladium prices.

20-Year Price Trends and Current Situation

Over the past 20 years, palladium has shown a long-term upward trend with volatility. Between 2000 and 2015, prices fluctuated between $177 and $1,100, mostly hovering around $500-$600.

A new upward wave began in 2015-2016, driven by ample liquidity and automotive industry support, with prices soaring from over $400 to above $2,800. During the COVID-19 pandemic in 2019, prices nearly halved within three months, but subsequent Federal Reserve stimulus measures pushed prices back up. However, as the Fed entered rate hike cycles, palladium’s rally was significantly hindered.

In 2023, palladium has generally experienced a volatile downward trend. Starting the year near $1,800, prices declined to around $1,400, then rebounded to $1,645 but remained under downward pressure. Concerns about US recession and lack of new positive catalysts are weighing on the market. According to 30 analysts from the London Bullion Market Association, the average price in 2023 is expected to fall 14.3% from last year to $1,809.80, while Heraeus Precious Metals predicts prices will fluctuate between $1,300 and $2,250 per ounce.

Investment Value Analysis of Palladium

Inflation Hedge Attribute: Like gold, palladium is priced in USD; when the dollar depreciates, prices tend to rise, providing asset protection.

Fundamental Supply-Demand Advantage: High industrial demand (which continues to grow) combined with limited supply creates favorable conditions for price increases.

Price Volatility: Palladium’s price swings are much larger than gold and silver, offering higher profit potential but also higher risk.

Positive Correlation with Gold: Over the past decade, palladium’s trend generally follows gold, with more significant gains. Although there was a brief divergence at the end of 2022, this correlation remains an important reference for investors.

Comparing Palladium Investment Methods: Spot vs Derivatives

There are various ways to invest in palladium, each with pros and cons.

Physical Palladium: Buying through banks or specialized institutions offers tangible investment but involves wear and storage costs.

Futures Trading: Conducted on the NYMEX, allowing two-way trading and margin operations. However, futures contracts have fixed specifications, strict expiration dates (must close or roll over at expiry), complex account opening processes, and high capital requirements, making them less friendly for beginners.

Contracts for Difference (CFD): As the most flexible derivative instrument, CFDs have clear advantages. They require very low minimum deposits (starting from 0.1 lots), no physical ownership, customizable contract sizes, 24/5 trading hours, adjustable leverage (up to 200x), and one account can trade multiple assets with simple account opening procedures. With CFDs, investors can start trading palladium with around $100, mainly paying spreads and overnight financing costs.

Compared to futures, CFDs’ biggest advantages are greater flexibility and ease of use. Investors can fully control their trading pace without being constrained by fixed contract sizes or expiry dates.

Palladium vs Platinum: How Should Investors Choose?

Fundamentally, palladium faces greater supply pressure and has higher demand, making it relatively healthier. Although platinum has higher liquidity (as a monetary commodity), palladium’s larger price swings mean that with the same capital, investors can potentially achieve higher returns. For risk-tolerant investors, palladium is a more attractive choice.

Beginner’s Guide

Before investing in palladium, investors should clarify their goals: are they seeking high returns through appreciation, hedging against risks, or long-term asset allocation? Different objectives require different strategies and risk tolerances.

Technical Analysis Tools: When choosing entry points, tools like Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) can be helpful. A MACD death cross (blue line crossing below red line) signals a sell; a golden cross (blue line crossing above red line) indicates a buy. RSI helps identify overbought or oversold conditions.

Monitor Market Dynamics: Due to differences in fees and regulations between the Taiwan market and overseas markets, investors need to stay updated on international trading information, timely capture price signals and policy changes, and make appropriate decisions. Especially considering geopolitical factors like declining Russian supply, ongoing attention is necessary.

Specific Steps to Start Trading

Trading palladium via professional CFD platforms is relatively straightforward:

Step 1: Choose a regulated trading platform, complete account registration, and deposit funds (usually around $100 to start).

Step 2: Learn fundamental and technical analysis methods, use the platform’s candlestick charts and indicators to identify suitable entry points and trading directions.

Step 3: Set trading parameters—including position size, leverage, stop-loss and take-profit levels—and place orders. For example, buy 0.1 lots of palladium CFD, set appropriate risk management parameters, then monitor real-time profit/loss and adjust positions as needed, closing when appropriate.

The palladium market is currently experiencing supply-demand mismatches, offering opportunities for insightful investors. With proper trading tools and risk management, participating in palladium trading is not only feasible but also attractive. The key is to choose a suitable investment method, learn to use technical tools, understand risks thoroughly, and steadily advance.