EMAILED ON December 17, 2018 BY Conor Grant

Not all that glitters is gold: The most precious metal in the world is… palladium?

The price of palladium, a precious metal most commonly used in the exhaust systems of cars, is now higher than its more popular precious metal cousins, gold and platinum.

After years doing the dirty work behind the scenes, the misunderstood metal is finally outshining its peers — but it’s likely that its luster won’t last.

WTF is palladium?

Palladium is a ‘noble metal’ (resistant to corrosion) that is created as a byproduct of mining other metals (like platinum, gold, and nickel). For decades, gold miners thought the silvery substance that formed in the sides of mine shafts was a worthless nuisance. 

But the chemical properties of palladium are unusual: When palladium reacts with car exhaust, it converts harmful carbon monoxide into less-harmful carbon monoxide.

So, when the US first started mandating tailpipe emissions standards in the ’70s, the market for palladium began to grow. Today, 80% of the world’s palladium is used to make catalytic converters.

Higher emissions standards mean higher palladium demand

Thanks to increasing global car emissions standards that require carmakers to produce cleaner cars, demand for palladium has increased for 8 straight years. 

Recent labor problems in South African mines have led to a decreased palladium supply, causing palladium prices to increase more than 50% in just 4 months, despite dull prices of other precious metals.

At the end of 2018, palladium demand is expected to outstrip supply by 1.2m ounces. Last week, the largest palladium producer in the world announced that it will invest $12B in palladium mining over the next 5 years to prevent further shortages.

An exhaust(ed) market

Palladium prices are likely to stay higher than gold and platinum for the near future. 

That said, nothing palladium can stay: Since palladium’s price is tied to demand for gas-guzzling cars, the rise of electric cars will cause palladium prices to fall eventually. 

Gold is the winning metal for a reason: It has enduring industrial, financial, and aesthetic applications that make it valuable (even during economic slumps). But before gold reclaims its rightful place on the podium, palladium will get its chance to shine.