Today, investing in precious metals is not just a trend but a tradition that various investors across the world follow. This investment has existed for ages and has stood firm throughout the years despite technological changes and business cycles.
For example, Palladium was discovered just a few decades ago; however, it is now considered one of the most precious metals next to gold and silver.
What Is Palladium?
Palladium is the name of a chemical element that belongs to the platinum group of elements. Click here to know more about the chemical structure of Palladium and its physical properties.
Palladium is often used as a substitute for platinum and is 50% more expensive than gold. However, with its white colour, Palladium looks as good as platinum. In addition, when worn as jewelry, Palladium does not change colour and is resistant to scratches. Here are a few reasons to invest in Palladium.
Rising Auto Demand
One reason to invest in Palladium is the rise in auto demand globally. In addition, Palladium has resistance to tarnishing, making it an ideal metal for industrial applications like catalytic converters in cars and low-friction parts for various machines. However, not all car manufacturers use Palladium; some use platinum in their equipment.
Dwindling Supply
The price of precious metals is always linked to the demand and supply factors. There is no doubt increased use of Palladium in various industries has led to increased demand, but the supplies are falling. Russia and South Africa are the two largest Palladium producers. However, the palladium output in these countries has been hampered for some reason, creating a supply crunch that has increased prices.
Undoubtedly, investing in Palladium seems like a good option. However, it is not without risks. Here are some factors to keep in mind when investing in Palladium.
Liquidity
While most people invest in precious metals for the long term, you may face circumstances that require short-term liquidation. Selling precious metals bars and coins can be a cumbersome process compared to stocks and bonds. For example, ETF and closed-end funds are traded every day on stock exchanges, and people buy and sell them almost every day.
Precious Metal Taxes
The U.S. Internal Revenue Service (IRS) has categorized precious metals like gold, silver, platinum, and Palladium as collectibles, and you are taxed at a 28% long-term capital gains rate. The capital gains tax on precious metals is higher as other assets are taxed at 15% to 20% yearly.
No Cash Flow
If you are looking for regular cash flow with your investment, investing in Palladium or other precious metal might not be good. Precious metals investment has no cash flow, and you depend on the increasing value of the asset you hold. As a result, you have to nop options but sell your precious metals in the open market to get hands-on cash.
You also need to consider the costs associated with the storage of metals. For example, there is always a risk of someone robbing your precious metals or your assets getting destroyed in natural calamities like floods, fire, or other natural hazards which cause damage to your house.
Palladium can be a good investment option, but you should consider all aspects mentioned in this blog when investing in Palladium.
