Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Gold and palladium stand out as the two most valuable precious metals in terms of price-per-ounce assessments, leading many investors to wonder which is the better investment. The centuries-long gold and silver duopoly in the precious metals space is challenged by emerging underdogs including palladium. This metal’s meteoric rise over the past few years has generated a lot of interest and comparison with gold. However, price isn’t the only relevant metric. Determining the investment merit of gold and palladium requires a deep understanding of their differences and similarities.
Palladium as a Precious Metal
Palladium is a silvery-white precious metal with a distinct sheen. Along with rhodium and platinum, it’s classified as a precious metal. This metal’s unique ability to elicit chemical reactions between various elements while remaining intact gives it a wide range of industrial applications. The automotive sector is the single largest buyer of palladium where it’s used for catalytic converters, but this shiny metal is also used in electronics, jewelry, and dental appliances.
Gold vs Palladium: Price
Over the past few years, gold and palladium have been vying for the top spot as the highest-valued precious metal in terms of price-per-ounce calculations. Recently, the competition has been one-sided as gold prices make a decisive move to the upside while palladium prices fall precipitously. Gold notched a record high of $2,400/oz in April 2024, and surging demand suggests this momentum will continue. On the other hand, palladium has lost 70% of its value falling from a high of $3,440/oz in March of 2022 to below $1,000.
Gold vs Palladium: Market Size
The disparity in market size between gold and palladium explains many of their key differences. The entire physical gold market, including gold bullion, gold bars, gold coins, and central bank reserves, is valued at $5 trillion. Conversely, the physical palladium market is worth slightly over $16 billion. That means the gold market is over 310 times larger than its palladium counterpart. This significant gap highlights how comparatively well-established gold is as a precious metals investment.
Gold vs Palladium: Supply & Demand
Understanding the supply and demand dynamics underlying gold and palladium markets offers valuable insights into their investment merits. The yellow metal enjoys a diversity of demand including jewelry, retail investments, technology, and, most notably, central bank gold reserves. The dynamic array of factors determining gold prices leads to a steadier price action. On the flip side, the demand for palladium has a heavy industrial bent. In fact, the automotive industry comprises 83% of palladium purchases. This lopsided demand leads to a greater imbalance between supply and demand, creating a more volatile market.
Gold vs Palladium: Historical Performance
Gold boasts a millennia-long history as a currency and store of value. It’s this precious metal’s consistent performance and stability that’s earned it a reputation as the most reliable tangible asset. Since the 1930s, the US dollar has lost 99% of its value compared to gold, underscoring the yellow metal’s ability to maintain its worth in the face of currency devaluation. In stark contrast, palladium has only been recognized as an investment in the late 20th century, sparked by outsized demand from the automotive industry. This precious metal wasn’t even founded until 1803. Palladium’s relatively short history has been marked by extreme volatility and price instability.
Gold vs Palladium: Prices Forecast
Historical performance is crucial for context, but investors are generally more concerned about where these precious metals are projected to go. On average, gold price forecasts predict a $2,506/oz high in 2024. However, some estimates reach up to $7,000/oz. These healthy predictions are spurred by the record-setting central bank gold demand and the dismal economic outlook. Palladium isn’t sparking the same confidence among analysts. Experts expect the new metal to face tremendous downward pressure from a combination of weak industrial demand and high supply.
Investing in Palladium
Advantages
Industrial Demand
Palladium experiences strong demand from the automotive sector which elevates prices and increases mining efforts. This demand has been the primary driving force behind palladium’s impressive price increase over the past few decades.
Limited Supply
Compared to gold, palladium is relatively scarce. The interaction between reliable demand and limited supply results in elevated prices, making palladium a valuable asset.
Considerations
Volatile Prices
Palladium prices are prone to considerable volatility when compared to other precious metals. The small market size with limited activity and concentrated demand results in unsteady price movement.
Future Demand
There are serious concerns about the long-term demand for palladium as the automotive industry and relevant legislation turn toward electrical vehicles which don’t use catalytic converters, the primary use of this metal.
Speculative Trading
The volatility of the palladium market attracts short-term traders looking to make quick trades. This intermittent trading pattern creates an unstable and speculative market, making it harder to use palladium as a long-term investment.
Geopolitical Risk
The natural reserves of palladium are heavily concentrated in a handful of countries with Russia, South Africa, and Zimbabwe comprising the majority of production. This hyper-centralized production leads to unstable supply mechanics, furthering volatility.
Investing in Gold
Advantages
Preferred Status
Gold is by far the most actively traded precious metal, far outpacing its counterparts like palladium. This preferred status as the go-to physical metal offers a sense of security and stability for investors.
Price Stability
Gold has a well-earned reputation as a stable asset over the long term with prices remaining relatively firm, even when the rest of the economy is turbulent. This stability makes gold a favored asset during periods of market instability.
High Liquidity
With the largest precious metals market, gold boasts high liquidity. In other words, it’s simple and quick for investors to convert their physical gold assets into a fair cash value when they want to. This leads to increased investment flexibility.
Growth Potential
Investors turn to gold for its price stability, but this precious metal can also generate considerable returns in the long run. This is especially true during periods of prolonged geopolitical instability or economic downturns.
Considerations
Counterfeits
The sheer scale of the gold market provides a larger target for counterfeit products and misleading sales tactics.
👉 Suggested Read: Buyer Beware Guides & Resources
Is it better to invest in gold or platinum?
There’s no cookie-cutter answer to the common question about the investment merit of gold vs palladium. In reality, both precious metals offer significant strengths and some considerations. Investors must consider these advantages in light of their specific investment goals, time horizon, financial parameters, and other relevant factors.