Palladium Jumps to 5-Month High

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"Palladium has the most upside of the 'big 4' precious metals."

Slowly and steadily, palladium prices staged a coup last week by rising to the highest level in five months.

The price of spot palladium topped off at $561 an ounce last week, an 8.5% increase for the week and a 32.9% increase for the year.

Palladium is primarily used in the manufacturing of automobile catalytic converters. More than half of global palladium supplies go into the production of autocatalysts. As such, palladium demand is generally correlated to the health of the worldwide automobile industry, which has strongly rebounded this year.

Platinum is the only precious metal that has consistently maintained a higher price per ounce than gold—and that's primarily due to platinum's use in catalytic converters.

But palladium is rapidly becoming the metal of choice for the auto industry, as it's less than one third the price of platinum. Auto demand currently accounts for about 50% of palladium demand. Spiking auto growth and new emissions standards in emerging nations will ensure strong demand for the foreseeable future.

Its use in electronics, jewelry, and dental work account for about 30%. Investors currently account for around 20% of demand, but that number may rise in the coming years.

But it has the most upside of the 'big 4' precious metals. It's emerging as a way for investors to store wealth, hedge against inflation, and speculate on industrial demand.

Since most of the world's palladium comes from South Africa and Russia, investing in palladium stocks can be a bit tricky. There are just a handful of large North American palladium producers including Stillwater and North American Palladium.

There are a few smaller companies exploring and developing similar nickel-copper-platinum-palladium projects.

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