Palladium Trading

With the Palladium trading price reaching its highest ever value in 2021, many traders are looking to the metal to capitalise on a volatile and active market. As is often the case with commodities, palladium is available through a wide range of instruments, including CFDs, options and futures. Read on to discover what impacts the palladium trading price, different instrument options, examples of strategies and how to get started. We have also created a list of the best brokers for palladium trading below.

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What Is Palladium?

Palladium is defined as a precious metal, which is a subsection of particularly valuable elements within the larger commodities market. Despite being one of the four primary precious metals, palladium is perhaps less well known than gold, silver and platinum. Palladium can also be defined as a platinum-group metal.

Palladium derives much of its value from its scarcity, with platinum-group metals making up a mere .0005 parts per million of the Earth’s crust. Palladium itself is 30 times rarer than gold, with approximately 200 metric tons of palladium mined every year. One of the most useful precious metals, palladium is primarily used as a chemical catalyst to speed up chemical reactions.

The automotive industry uses palladium in catalytic converters, the exhaust components that convert harmful elements from emissions into less harmful substances. The metal is also invaluable within the nuclear business for its unparalleled ability to absorb hydrogen.

The History Of Palladium Trading

First discovered in 1802, one of the first uses of palladium was to treat Tuberculosis, though this was soon abandoned due to the abundance of side effects. Later on, the metal saw adoption in jewellery, forming a strong and durable alloy when added to gold, as well as limited use in physical currency.

The major industrial adoption of palladium came in the form of the catalytic converter, which was introduced to vehicles in the late 1980s. Tightened emissions standards on vehicles saw a surging demand for the commodity, with all petrol cars requiring palladium catalytic converters. The metal is now essential to many current technologies and processes such as renewable energy and computing.

Palladium trading guide for beginners with strategies, assets and more

What Influences The Palladium Trading Price?

The palladium trading price has a volatile reputation. Historically, periods of global economic recession such as the 2001 and 2008 financial crises and the covid-19 pandemic have caused sharp declines in the palladium trading price. But what about the markets and technologies that lead to palladium price increases?

Automotive use in catalytic converters for petrol vehicles is a major price determinant for the palladium trading price. Almost 75% of all palladium mined is used for this purpose, meaning that the value of the metal is closely tied to the manufacture of new petrol vehicles. A global market shift from diesel, which uses platinum in its catalytic converts, to petrol has been triggered by the diesel emissions scandal and the increasing popularity of petrol hybrid vehicles.

The push for renewable energy has also seen an increase in palladium demand, with the precious metal essential for nuclear power plants, solar panels and fuel cells. With the majority of the world’s palladium mined in Russia, the geopolitical climate can impact prices if sanctions such as increased taxes or export restrictions are imposed on the region. However, the most influential palladium trading price determinant is undoubtedly its supply.

Recent mining difficulties due to both the covid-19 pandemic and environmental factors are set to see palladium supply fall short of demand for the tenth successive year. The prolonged imbalance between market supply and demand for the commodity is viewed by many as the stimulus for the meteoric rise of palladium trading prices since 2011.

Today’s Palladium Trading Price

How To Trade Palladium

As with all of the major precious metals and many other commodities, traders have a significant number of instrument choices for palladium trading.

Spot Trading

Spot trading is the method of online trading that most traditional investors will be most familiar with. It involves purchasing a set amount of the commodity at current market prices, often through exchanges or brokers. A spot trading platform for palladium will often be a commodities or precious metals specialist, dealing in either physical palladium bullion or trading on an unallocated basis through a bank or intermediary.

With the former option, a trader receives palladium in physical bars or coins. Physical precious metals trading can be a better option for those worried about counterparty risk or the safety of their local economy.

In the latter, an exchange or bank retains control of the metal whilst the buyer holds the palladium on their account. The advantages of this spot trading delivery method are the absence of storage or insurance costs and the comparative ease of sale.

Futures

Futures contracts are obligations to purchase an asset such as palladium at a set time in the future for a price decided at the time of opening the contract. Futures are predictions as to what the palladium trading price will be at the time of contract expiry and can differ based on the expiry time. These future exchanges are locked in via contracts that are usually standardised, bought and sold on centralised exchanges.

Futures often utilise leveraged trading to enhance profits from contracts but they also come with the risk of increased losses. Traders can generally cash settle their contract ahead of expiry with another futures contract or a spot trade.

ETFs

Exchange-traded funds, or ETFs, are day-tradable funds that act as trackers for specific markets, industry sectors or commodities. The main advantage of ETFs over traditional funds is that, while funds can only be bought and sold at the end of a trading day, ETFs are bought and sold throughout the day as discrete stocks.

Traders can choose between ETFs that aim to track the trading price of palladium or those that provide exposure to the palladium market through mining and refining companies.

Price tracking ETFs can either follow the spot or futures price of palladium and represent a more straightforward and accessible way of investing in palladium than the markets themselves. What is more, seasoned traders can take advantage of leveraged or even inverse tracking ETFs for advanced opportunities.

Palladium Companies

Investing in shares of firms involved in the mining and refinement of palladium, either individually or through an ETF, is an indirect method of investing in the metal. Trading shares in companies allows you to use many of the instruments in this list such as CFDs, options and ETFs to capitalise on both short and long term opportunities for profit.

Many of the companies involved in palladium mining also deal in other commodities such as nickel or platinum, so traders that wish to invest exclusively in palladium may need to look elsewhere.

Options

Palladium options trading is a popular form of derivatives speculation that allows you to speculate on the future price of an asset without the obligation to purchase it at expiry. Options trading involves choosing a strike price either above or below the current asset value and an expiry time at which the contract ends.

Options contracts differ based on the country in which they are created. American-style options are traded on regulated exchanges, offering call and put contracts to traders with the option to close out at any point. Options in the rest of the world are traded over-the-counter (OTC), with individual brokers setting odds for contracts. These contracts cannot be cashed out early but have a set gain or loss amount based on whether the strike price is met or not.

CFDs

A contract-for-difference, or CFD, is a popular financial derivative used to speculate on whether the price of an asset will rise or fall. CFDs are somewhat similar to options but differ in that they are purely speculative instruments with no option to exercise the contract and purchase the underlying asset. CFDs also have no set expiry time but they are subject to daily financing costs that are applied to cover the cost of leverage, as well as additional overnight charges. Due to this, CFDs are primarily used as intra-day trading instruments.

A CFD is an over-the-counter instrument, meaning that they are offered by specific brokers rather than traded on an exchange. Traders can go either long or short on precious metals using CFDs and do not need to own any of the underlying assets.

Spread Betting

Similarly to CFDs, spread betting allows traders to speculate on the palladium trading price without needing to purchase any physical palladium. Spread betting brokers will offer a low and high price, with the difference between these referred to as the spread. Bettors are rewarded for each “point” the palladium trading price moves past their predicted value. Spread betting is popular due to its inherent leverage and the tax advantages in some jurisdictions where gambling profits are tax-free.

Pros Of Palladium Trading

Here are some advantages of trading palladium:

  • A Tangible Asset – The ability to invest and trade in palladium bullion can be appealing to traders that prefer to invest in tangible assets. The intrinsic value of the metal guarantees that it will always have some value, as opposed to stocks and cryptocurrencies that can completely disintegrate overnight.
  • In Demand – With demand for palladium exceeding supply for the last ten years, the market will likely be active for the foreseeable future.
  • Volatile Markets – When trading with derivatives such as options and CFDs, a volatile market creates greater profit opportunities. Compared to other precious metals, palladium is far more suitable for successful derivatives trading.
  • Range Of Available Trading Instruments – An area in which commodities excel is the range of trading instruments. Palladium trading is available with CFDs, ETFs, spread betting, futures contracts and spot market trading.

Cons Of Palladium Trading

There are a few disadvantages of palladium for traders to consider:

  • Vulnerable To Global Economic Market – A general strength of precious metals is resistance to volatile markets, with assets such as gold and silver considered great stores of value. Historically, palladium has not shared this strength.
  • Diminishing Long-Term Demand – At present, the use of palladium in catalytic converters makes up 75% of the total global demand. Unfortunately, carmakers are rapidly shifting their focus to electric vehicles, with many countries pledging to restrict the sale of new fossil fuel vehicles in the not-so-distant future.
  • No Dividends – For long term investments, compounding dividends can have powerful effects. An investment in palladium-related companies through individual stocks or an ETF remedies this concern but does not provide pure tracking of the palladium spot or futures trading price.

Palladium Trading Strategies

If you wish to become a successful palladium trader, a repeatable and effective trading strategy is key. Here are a few ideas:

Price Determinant Monitoring

A method commonly used to create a palladium trading forecast is through monitoring the industries in which the metal is crucial. In addition to specific palladium news, you should consider trends in the automotive and nuclear fields. Moreover, the relatively minute amount of palladium mined each year leaves the commodity very sensitive to price changes based on supply issues.

Keeping up to date on news concerning wider palladium trading economics is great a way to stay ahead of the curve when it comes to predicting future value.

Arbitrage

As opposed to speculation or investment in the price of an asset, arbitrage aims to take advantage of price discrepancies between different brokers or exchanges offering the trading of precious metals. For example, if one exchange is selling spot palladium for $1,800 per ounce and another is buying it for $1,850, traders can simultaneously buy and sell an ounce of palladium for a $50 profit. Global palladium trading hours are 24/7, which provides ample opportunity for arbitrage.

Unfortunately, due to the physical nature of commodities spot markets, traders may have to arrange to ship bullion between exchanges. Often arbitrage opportunities can arise internationally due to currency differences, so overseas shipping may have to be arranged. Exchanges will often pay the spot price for palladium upon its arrival, so, if the price drops during shipping time, losses can occur.

Technical Analysis

A method often used to predict the future palladium trading price is technical analysis. Many swear by the forecast provided by technical analysis of a market when speculating on assets like palladium. Technical analysis is where trends discerned from trading charts and patterns are used to make future price predictions.

The excess demand within the palladium market makes technical analysis a particularly strong method of price prediction, which can be speculated on either through long term investment or derivatives like options contracts, CFDs or spread bets.how to get started with palladium trading for cfds, etfs, options, futures and stocks

How To Start Trading Palladium

If, like many, you see the palladium market as a great environment for profitable trading, here is a guide to get started.

Choose A Palladium Trading Instrument

Traders in the commodities markets are often spoilt for choice when it comes to trading instruments, with palladium mining company shares, bullion, futures, tracker ETFs and options trading among the available selections. Each of these instruments will benefit different trading styles, with some suited to different expected lengths of trade and others supporting leveraged trading. For example, CFDs are perfect for intraday speculation and tracker ETFs present an accessible form of long-term investment.

Decide On A Trading Strategy

While choosing your trading instrument, aspects such as time frame and access to leverage will need to be considered. However, an effective strategy does not end there. The most successful traders develop validated signals based on either technical analysis or external price determinants that trigger a decision to trade. The best take both of these elements into account to construct a complete picture of the palladium market.

Find A Palladium Brokerage

When trading palladium, your broker can have a significant impact on their success and options. A palladium trading platform may come in the form of an exchange or broker, depending on your preferred trading instrument. It is important to ensure that a broker supports the instrument you want to trade.

While the most important aspect when trading palladium is selecting a legitimate and safe broker, other considerations such as spreads and fees will play a significant part in your decision. In addition to ensuring that a broker is regulated and positively reviewed, take some time to check out their fee structure, margin and leverage capability, available trading platforms and deposit and withdrawal methods. A complete guide to comparing brokers can be found here.

Open Your Account

After completing your due diligence and deciding on a brokerage or exchange, the next step is to open a trading account. Before depositing funds, some brokers may be required by their regulators to complete a know-your-customer (KYC) check to verify your identity and financial status.

Once this is completed, you are free to deposit funds with which to trade. If engaging in leveraged speculation, make sure to deposit enough funds to not trigger a margin call and lose your position. Depositing funds into a trading account is also usually straightforward, with the best brokers offering a selection of funding options such as bank transfers, PayPal or Skrill.

Place Your Trade

Select the trading instrument you require and enter the terms of your trade. This can be a simple process like placing a market buy order for palladium general spot trading or more complex like purchasing an options contract. For some over-the-counter trades such as spread betting or some options contracts, this is the end of your active involvement in the trade. However, for CFD, stock, ETF and American options purchases, traders should monitor the details of their trade and capitalise on any market movements.

Palladium Trading Tips

Here are a few extra bits of information that should help refine your approach.

Demo Account

Before trading with a new asset or financial instrument, paper trading is a great way to become familiar with the intricacies of the market or contract. Many online brokers will provide a demo account facility so that traders can practise palladium trading using digital funds before wagering real capital.

Further Research

As well as keeping up to date with palladium trading news, you are encouraged to perform further research into the price determinants and historical trends of the commodity’s value. The more complete a picture you have of the metal’s price influences, the better you will be able to predict future price trends.

Strategy Education

Having a trading strategy is a must for anyone that wants prolonged success. However, for derivatives, it is especially helpful to have some advanced hedging or options strategies up your sleeve. While palladium trading platforms may provide some educational content, you can use the wealth of free educational content on the internet to learn advanced options trading strategies.

Palladium Trading Hours

Palladium spot and futures can be traded 24/7 globally, with major exchanges providing trading hours in line with their local time zones in the UK, the US and Asia. ETFs and palladium company shares can be traded in the market hours of their local exchanges, while broker based over-the-counter derivatives will vary depending on the provider.

Final Word On Palladium Trading

When it comes to precious metals, Palladium is an asset that is a little bit different. As a metal predominantly used in industry, palladium trading is highly impacted by the volume that is extracted from the ground each year. Its volatility is in stark contrast to metals such as gold and silver, which are renowned for being a safe store of value in times of financial turbulence. Palladium presents traders with unique opportunities for options trading and futures trading but is also strongly linked to external markets such as renewable energy and the automobile industry. Follow our step by step guide above to get started.

FAQ

What Are The Palladium Trading Hours In The UK?

Palladium trading hours in the UK will differ depending on the specific instrument you wish to use. For spot and futures markets, you can access a range of global exchanges for 24/7 palladium trading. Over-the-counter derivatives will vary based on the specific broker, while ETFs and stocks will adhere to their local market trading hours.

What Factors Influence The Palladium Trading Price?

The palladium trading price is very sensitive to mining volume due to its scarcity, with setbacks in individual mines such as floods or collapses having a significant impact. Palladium is also closely tied to the production of new petrol vehicles, due to its use in catalytic converters, and also sees extensive use in solar panels and nuclear energy.

Where Can I Find Palladium Trading News?

Many online trading platforms will provide links to the latest palladium news. It is also a good idea to keep informed on news in related enterprises such as the automotive and renewable energy industries from a variety of sources.

Which Are The Best Brokers For Trading Palladium?

When trading palladium, we recommend that you look for brokers that offer the right instruments for you, are regulated by reputable agencies and have low trading fees.

What Is The Palladium Trading Symbol?

There are several popular palladium spot ETFs that can be traded on the stock market. The Aberdeen Standard Physical Palladium Shares ETF has the symbol NYSE: PALL and the Sprott Physical Platinum & Palladium Trust has the trading symbol NYSE: SPPP.