Discovered in 1803, palladium is a malleable, lustrous and silvery element. It belongs to the platinum group of metals (PGMs), which are very rare compared to other metals. Of all the PGMs (iridium, osmium, palladium, platinum, rhodium and ruthenium) palladium has the lowest density and melting point. Its atomic number, on the periodic table of elements, is 46. Palladium is resistant to corrosion.
Palladium is extracted from placer deposits, from which other PGMs are also derived. The majority of the global supply of palladium comes from reserves in South Africa, Zimbabwe, Russia, the United States and Canada. South Africa possesses over 90% of the world’s PGM reserves.
Palladium is produced as a by-product of other metals, for example copper or nickel. The Russian Federation is a leader in the global production of palladium.
Until the 20th century, there were no widespread commercial uses for palladium. In the 1970s, stricter automobile emission standards were introduced, which increased the demand for the metal. Palladium is unique in that it can absorb carbon and oxidise it before it is emitted and pollutes the air. The metal is vital for the manufacturing of catalytic converters as it speeds up chemical reactions. Since 1989, over 75% of palladium mined is applied by the automobile industry.
Palladium is an essential metal in electronics and in many other industries, including fuel cells, jewellery production, medicine and dental, oil refining, water treatment, photography and among other industries.
As a commodity, palladium attracts a lot of retail traders and investment funds. The reason is that this metal is 30 times rarer than gold and is hard to substitute for other metals thanks to its remarkable properties.
Apart from physical coins and bars, investors get exposed to the palladium prices via derivative contracts – futures and options.
Futures on palladium are offered by the Chicago Mercantile Exchange (CME). Entering into a future contract you agree to buy or sell palladium at a specified price and time in the future. The standard contract size for palladium at the CME equals 100 troy ounces.
Palladium options are also traded on the Chicago Mercantile Exchange. An option contract is quite similar to futures, however it stipulates the right not an obligation to buy or sell. The underlying asset for CME options is a NYMEX Platinum futures contract.
Another derivative type that enables palladium trading is a contract for difference (CFD). A CFD is an agreement to pay the difference between the palladium price at the start of the contract, and its price at the end of the contract. If palladium moves in the direction you forecast, then you profit. But if it goes against you, the price difference is deducted from your account.
At Capital.com, you can trade on palladium price movements via CFDs. Keep up with the palladium chart on our online and web platforms.
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