Palladium Soars to All-Time High as Russian Conflict Continues

Palladium Soars to All-Time High as Russian Conflict Continues

Palladium Soars to All-Time High as Russian Conflict Continues

March 9, 2022 1219 view(s)

This article expresses the viewpoints of one of our precious metals specialists, based on recent news reports and opinion-based analysis of the situation. This information should in no way be taken as professional investment advice. As always, we encourage you to talk to your financial advisor before making any investment decisions.

Palladium is not on most investors' radar, but palladium has already climbed 76.74% since the start of the year. That is an excellent return in a few months, but keep in mind that 37.06% of that growth has happened since Russia invaded Ukraine on February 24. (At the time of this article, the price of palladium is $3328.88, which is just shy of the all-time high set yesterday in overnight trading).

Palladium Soars to All-Time High as Russian Conflict ContinuesPalladium Soars to All-Time High as Russian Conflict Continues

Historical Palladium Prices

 

The two primary producers of palladium are South Africa and Russia. Russia produces about 40% of the world's palladium supply and the Ukraine conflict has industrial users and investors nervous about supply chain disruptions. The United States imported about 76,000 kilograms of palladium in 2021 and 35% (25,900 kilograms) of the palladium comes from Russia and 31% (23,560 kilograms) comes from South Africa. The remaining palladium comes from Germany (9%) and the rest comes from a variety of small deposits around the world.

 

 

South Africa does not have enough palladium deposits to offset the shortage. Even if South Africa could ramp up production to cover the shortage, which they cannot, there is another challenge. The mining process of palladium is very delicate and after the very time-consuming mining, there is about a six-week period before production into a usable form. It would be months before there would be excess metal in the market to bridge the gap.

 

Palladium Soars to All-Time High as Russian Conflict ContinuesPalladium Soars to All-Time High as Russian Conflict Continues

 

The primary use of palladium is in the automotive industry for emission standards components like catalytic converters. According to Edmunds, the 2022 demand for new vehicles will be 1.2% higher than the 2021 demand (this equates to 15.2 million total new cars sold). The covid pandemic has already caused bottlenecks in the supply chain. A prolonged palladium shortage will most likely cause a spike in automotive prices and consumer wait times. Depending on Russia's European aspirations, prices on everything will probably continue to rise.

 

According to U.S. law, the U.S. Mint is authorized to make both bullion and numismatic (proof) palladium coin $25 face value coin but is not required. Since 2017, the United States Mint has produced palladium bullion and proof coins. The schedule for the 2022 Palladium Eagle release is scheduled for the summer of 2022. In 2009, the bullion demand was so high that the U.S. Mint did not make the Gold American Eagle, Platinum American Eagle or Silver American Eagle proof coins. (They did make the 2009 Gold American Buffalo proof coin, though). 2009 was the only interruption in the production of the core products since 1986. 2022 is probably going to be the second year with disruption.

 

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If the U.S. Mint releases the 2022 Palladium American Eagles in the summer, they will need to acquire the metal now. The price of palladium is at all-time highs and more than a 1/3 of the United States' supply is in jeopardy. There has not been an official announcement of any kind, but it is highly probable the U.S. Mint will not produce the Palladium Eagle proof coins this year. It is also very likely that the U.S. Mint will either not release the bullion coins or be a tiny mintage. Depending on how long the Russia conflict goes and what happens when the dust finally settles, we may see the end of the Palladium American Eagles altogether.

 

If the U.S. Mint decides to discontinue the Palladium American Eagles, the small five-year collection (2017-2021) will become a highly sought piece of U.S. Mint history under President Trump's appointed Mint director, David Ryder. Both investors and collectors will be scrambling to find all the Palladium American Eagles they can. Clever investors will move ahead of the curve to purchase all the Proof 70 series first and then go after the bullion if there is ever a spot price or premium pullback. 

 

2022 Palladium American Eagles

 

It is pure speculation that the U.S. Mint will forgo the production of the 2022 Palladium American Eagles, but it seems like the logical move for the U.S. Mint to make. A small amount of U.S. palladium production will be needed to help meet new car demand and ease some of the supply chain challenges. Palladium is already up 37% since the Russia conflict began. If things continue as they have been going, the palladium supply will be meager and demand high. Acting on foreseeable trends is how investors make money.

 

  1. 2021 Palladium American Eagle Proof 70 Coin
    2021 Palladium American Eagle Proof 70 Coin
    Special Price $6,404.90 was $6,742.00

It is foreseeable the U.S. Mint will have supply problems before summer, which will make the Palladium American Eagles even rarer. Since the palladium problem won't be solved anytime soon, adding some Palladium American Eagles to your portfolio may be wise. Call the experts at the U.S. Gold Bureau for help. (800) 775-3504

 

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