Anyone with a basic grasp of the term “supply versus demand” will be able to understand the behavior of palladium prices over the past two years. Though the precious metal known as palladium is part of the PGMs or Platinum Group Metals, it has such numerous qualities of its own that it is an investment vehicle worth exploring.
The reason that palladium prices have changed sharply over the short term is quite simple – the world financial crisis has caused many things to happen with the palladium markets. These “things” have created a situation in which the actual supply of palladium is not going to meet the market and industrial demands for it, and this means that palladium prices will continue to rise.
Here’s how it happened – in 2008, we all know that the first signs of global financial instability began to appear. Though this involved the mortgage and real estate markets, it quickly spilled over into the automobile and banking markets as well as in many major world economies.
This led to a slowdown in production of many different materials and items, and any slowdown in production means a slowdown in the demands for the many kinds of supplies necessary to make consumer and industrial products. This applied to palladium production too.
Because it is a metal put to use in a diversity of industries, but especially in the automotive industry, the global financial crises had an immediate impact on palladium prices. What happened soon after 2008, however, is also quite remarkable as well.
If you look at a long-term chart of the metal’s pricing, you would notice that it declined rapidly throughout 2008 and into 2009, as would be expected in the market conditions. As 2009 transitioned into 2010, however, it is easy to see that investors had started to turn to palladium as a “safe haven”. This is an investment tactic that puts capital into materials that tend to hold their value and serve as hedges against risk and/or loss. This caused a somewhat rapid increase in pricing.
This upward trend continues because the markets are showing some signs of recovery and industry is beginning to “get back on track”. This is where the investment potential for palladium becomes quite obvious. If industry needs a material that was not produced in abundance for a while, and if the markets are also calling for it, it means that supply versus demand is about to “kick in” and that means anyone with palladium holdings will “win out” in a major way.