When it comes to precious metals, palladium is kind of like the fourth Marx Brother: you know it exists, and it appears on the public radar occasionally, but you don’t see or hear much about it. Like Zeppo, though, palladium is an important part of its family, and has substantial value of its own.

(We’ll ignore Gummo here, since he was never in any of the movies. Think of him as a Marx version of copper.)

Palladium is also the fourth precious metal to have been chosen for its own U.S. Mint bullion coin. That being the case, it certainly merits a closer look from our bullion-loving perspective.

All About Palladium

Palladium is a silvery-white metal of the platinum group, like silver and nickel. It’s just as useful to industry as its fellow precious metals, being mostly used in automotive catalytic converters, dentistry, and watchmaking.

It’s also an important component in the manufacture of jewelry, blood sugar test strips, spark plugs, surgical instruments, and professional-quality transverse flutes. Plus, it’s one of only four metals (along with the Big Three) to have an ISO currency code, for reasons of banking and bullion exchange.

Oh, and if you were wondering: the name comes from Pallas, one of the largest asteroids in the solar system, which was named after an obscure mythological entity killed by the Greek goddess Athena.

Investing in Palladium

While the per-ounce price of palladium beats the heck out of silver’s, at about $600 vs. about $24 in late 2010, it’s cheaper than gold or platinum. This makes it attractive to some people who don’t have the funds to invest heavily in those metals, but still want to invest in a high-value commodity.

Palladium’s volatility, however, is a problem for most investors. As recently as October 2008, it was trading for less than $200 (though the value has trended upward since). Conversely, in January 2001, palladium hit $1100 an ounce, when gold was trading for less than $300.

The price spike was due to Ford Motor Company stockpiling the metal, in anticipation of a shortage. Sadly, Ford miscalculated and lost about a billion dollars when prices fell to the $450 range a few months later.

Caution: while palladium is very rare in nature (it’s significantly rarer than platinum, which is 15 times rarer than gold), don’t assume this means that it’ll someday be worth more than gold. It might, but you have to realize that its worth lies primarily in its value to industry. That can easily change.

Worse, it’s also a product of nuclear fission, and can be extracted from spent fuel rods at a rate of about a kilogram per ton. If a more economical way is found to extract it, the supply could increase significantly, in which case the price may suddenly fall in response.

Palladium Bullion

The U.S. Mint hasn’t struck any palladium bullion yet, though they fully intend to do so. In 2008, at the Mint’s urging, Congress passed a bill authorizing the production of a palladium version of the classic Saint-Gaudens double eagle.

Most likely, the only thing holding the Mint back is the requirement that the metal has to come from an American source. The U.S. controls only 5% of the world’s known palladium deposits. So, until American palladium bullion becomes a reality, you’ll have to stick to foreign options.

Fortunately, the Royal Canadian Mint has been producing Palladium Maple Leafs consistently since 2005. It’s not from a U.S. source, but it’s certainly American, so I have no qualms about recommending Maple Leafs as palladium bullion until our Mint gets it in gear!

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So what’s your take on palladium?  Are you considering investing in palladium bullion? Let me know below…