Palladium price Chart - Palladium Spot Price

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Palladium Price Guide

Palladium Price Fixing

Most precious metals are subject to a practice called price fixing. A combination of factors are assessed to determine the fair market value of a particular metal. Price fixing helps to calculate a global base price that accounts for supply and demand. It also accounts for the fluctuating values of various currencies. The basic process of price fixing involves determining a price at which the number of buyers equal the number of sellers to create what is called a benchmark price. This practice creates a baseline price that helps to keep the markets stable according to natural market variations. However, due to increased regulatory scrutiny in recent years, certain changes have been made within this industry to ensure that prices are determined fairly and that there is no price-rigging involved.

Until 2015, the daily prices of palladium were determined by a group called London Platinum and Palladium Market Fixing Limited. Two daily conference calls were used to set the prices of these metals. As of January 2015, however, this responsibility was transferred to a different organisation. Palladium price fixing is now overseen by the London Metal Exchange. Instead of using conference calls, the price is now set by a computer algorithm. Regulatory agencies called for this change to ensure a fair system that has a greater amount of transparency.

The London Metal Exchange is a leader in the precious metals industry, and it has been in operation since 1877. The organisation traces its roots to the Royal Exchange in London which was founded in 1571. It is now a Hong Kong-owned company that was chosen to take on this responsibility because it was already positioned as a global authority in the precious metals industry.

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Current Price Fixing Practices

The London Metal Exchange uses a program called LME Select to determine daily palladium prices. This FIX- based trading platform was developed in 2001 by a Swedish company called Cinnober. Since its launch, it has proven to be a more reliable solution to price fixing that reduces the risk of any artificial price rigging.

The program calculates the fair pricing of palladium by factoring in several different variables that include supply, demand and other market forces to determine the benchmark prices of certain metals. Because it uses an algorithm that is capable of processing global industry-related data, it is believed to be a more reliable system for determining fair pricing than the historical system of price fixing.

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Past Price Fixing Practices

When the London Platinum and Palladium Market Fixing Limiting was overseeing the responsibility of price fixing, it used a manual method of calculating the fair market values of those metals. Its system involved two daily conference calls during which the corporate members of the organisation would make bids on these metals at different price points. They would do this on behalf of clients who provided financial support for the organisation by paying a small fee per unit purchased.

The fair market value was assessed by determining the price point at which the number of buyers roughly equalled the number of sellers. As of 2014, the four members of this group were BASF Metals, Goldman Sachs, HSBC and Standard Bank. This group announced in a press release during 2014 that it had decided to transfer the responsibility of price fixing to the London Metal Exchange.

Because of the global economic crisis, there had been increased regulatory scrutiny of these types of operations. Changing to a computer-based system provided a solution that used raw data that could be evaluated. It also allows for greater transparency that investors find reassuring. Because the London Metal Exchange was already positioned to take on this responsibility, it was chosen to handle those duties.

How Palladium Prices are Determined

Because the price fixing process is now handled electronically, the algorithm used to determine pricing process large amounts of raw data instead of the simpler system that did leave room for potential price manipulation. LME-Select is programmed to calculate this benchmark pricing twice daily on a similar schedule to the one used by London Platinum and Palladium Market Fixing Limited.

The raw data about industrial supply, industrial demand, global currencies, futures markets and other variables is now calculated in a way that ensures that the data is reflecting actual market conditions. To understand why these factors must be considered in the algorithm, it helps to know a little bit about the various factors that have historically influenced palladium's prices.

Factors That Influence the Palladium Price

The program factors in several different variables including supply, demand, the futures markets and national economic factors that influence the value of currencies. These are the same variables that the manual process of price fixing was intended to account for, but there is now a greater level of transparency.

As with all precious metals, the global market treats palladium like a good or commodity and not a currency. This is true even when buying numismatic coins. Because of this, each national economy is subject to pricing according to its own currency. Whether that currency is strong or weak determines its purchasing power.

Supply and demand also help determine the fair market value of precious metals and can affect prices tremendously. High demand and low supply generally commands higher prices for this metal. Low demand and high supply, on the other hand, lowers the prices.

Palladium has many industrial uses, so industrial demand plays a large role it is pricing. This metal is used in a wide variety of different industries. Its uses range from creating catalytic converters and electrodes to applications in dentistry and photography. It is also one of the main metals used to create white gold.

Because it has so many uses in various industries, the demand among investors is high, as well. Being a rare metal, palladium is often lucrative for investors who are interested in speculation. Buying bullion when the market is weak and reselling it when the market strengthens is often an excellent investing strategy. The limited supply of this metal ensures ongoing profit potential. However, unlike gold and silver, this precious metal is subject to extreme price fluctuations which limits its usefulness as a hedge against other potential losses. These price variations are what makes it desirable for those who want the potential for high capital gains.

Palladium price development - Platinum Spot Price

Why Palladium Prices Fluctuate

The factors that determine palladium's value are in constant flux .
Currency values change on a regular basis in relationship to other currencies, and this affects the prices of all commodities in any given national economy. Supply and demand also change on a regular basis.

These various factors can significantly affect the prices of metals like palladium. Because these market factors are major determinants of the value of this metal at any given point in time, they can drastically increase or reduce its value in a short period of time.


The Role of palladium Spot Pricing

Spot pricing is used to calculate the fair market value of a particular metal at a particular time and location. Price fixing determines the immediate spot pricing, and helps to regulate the industry across a global market.

The spot price also plays a role in determining futures market pricing. It also helps determine the price of numismatic coins, although other factors are also included in determining the cost of collectible coins.


Palladium Prices and Numismatics

When determining the value of numismatic coins, spot prices serves to offer a baseline or benchmark for fair pricing. However, collectors consider other factors as well, including the rarity of a particular coin, its condition and its age. Collectibles are sometimes worth far more than the spot price of palladium.

These types of investments are handled differently that those relating to bullion, and coins generally take longer to sell. This is because there is a smaller number of collectors than investors who are interested in bullion. However, the longer wait for a buyer often results in significantly higher prices that are associated with bullion.


Palladium Prices and Bullion

Bullion tends to be of more interest to those interested in palladium solely for its investment potential. Each bar always lists basic information about the bullion itself. Its fineness and its standardised weight are inscribed into each bar making it easy to assess its value at any given time on the global market. Fineness refers to the amount of actual palladium content.


How Currency Fluctuations Affect the Price of Palladium

Currency fluctuations play a large role in the cost of palladium in a a given market. Because a strong dollar has more purchasing power in a national economy, the strength of a particular currency determines how much of a good can be purchased. Because buyers often buy palladium in large quantities, purchasing with strong dollars allows for more profit potential.


How Futures Markets Affect Palladium Prices

Futures markets can raise or lower the price of precious metals. During times of general economic instability, investors are often in a hurry to sell off less stable investments in favour of those with greater levels of stability. It is during these times that investors tend to get the best prices of metals like palladium.


When the global economy is weak, industries that use palladium in their everyday operations tend to either slow down production or resort to using cheaper metals. This can drastically lower palladium prices. Speculators can also drive the prices up by creating high future demand which affects current spot pricing.


Why Palladium has Hight Profit and Loss Potential

Compared to gold, palladium is an extremely volatile investment. There is potential for high profit margins, but there is also potential for extreme devaluation.

Investors who choose to buy low during times of economic uncertainty and retain their holdings until the value increases often make large profits. Investors who do not wait for prices to reach their peak before selling, however, sometimes experience substantial loss.

A Brief History of Palladium

Palladium was not discovered until 1803 by William Hyde Wollaston, an English chemist and physicist. Because it is a relatively recent discovery, it has a much shorter history than gold or silver. It derived its name from an asteroid called Pallas and is in the same group of metals as platinum.

Investing in palladium bullion and numismatic coins can be a lucrative endeavour for those who are able to tolerate extreme fluctuations in value. Purchasing this metal when market is weak and selling when the market is strong can double or even triple the value of the original investment. As with any speculative investment, there is also a potential for loss in value. For this reason, those who are unable to tolerate risk will benefit more from investment in gold or silver. Those metals tend to hold their value at a more steady rate, although they offer less profit potentials. People who want to take more risks tend to prefer investments that offer high profit potential.