What Is Platinum and Palladium Used For, and Why Are They Moving Higher?

The average trader is familiar with gold and silver—gold being the precious metal purchased by central banks and governments as an alternative to fiat currency and to bolster balance sheets during periods of policy uncertainty. Silver, meanwhile, is both a precious and industrial metal, often viewed as a leveraged alternative to gold due to its widespread use in electronics and other industrial applications. While silver ore is more abundant than gold, it requires significantly higher processing costs. Both metals are currently in strong physical demand and remain in supply deficits relative to final demand.

But what about platinum and palladium? What makes these metals unique, and why are they beginning to move higher?

Platinum is a silver-white metal known for its durability, corrosion resistance, and ability to maintain stability under extremely high temperatures, making it ideal for heat-intensive industrial applications. Platinum is significantly rarer than gold, with more than 70% of global production coming from South Africa. Like palladium, platinum is used in jewelry, but its primary source of demand comes from industrial uses. These include catalytic converters used in internal combustion and diesel vehicles, hydrogen fuel cells (which are seeing increased interest due to data-center expansion), and various medical applications such as surgical instruments.

Platinum prices have remained range-bound over the past decade as demand for internal combustion engine (ICE) vehicles weakened amid the global push toward electric vehicles, reducing the need for catalytic converters. In many cases, though not all, platinum can be substituted for palladium, which has also contributed to price compression. When platinum trades at a significant premium, manufacturers shift toward palladium to reduce costs, and vice versa.

Palladium, another member of the Platinum Group Metals (PGMs), receives less attention from traditional equity investors but shares many characteristics with platinum. It is slightly softer and more chemically reactive, yet well-suited for many of the same applications, particularly catalytic converters in gasoline-powered vehicles.

A major distinction lies in supply. Russia is the world’s largest producer of palladium, accounting for more than 40% of global output, while South Africa contributes over 30%. As a result, palladium carries higher geopolitical risk, especially given ongoing tensions between Russia and the West stemming from the war in Ukraine. Palladium is also used in jewelry, particularly in Asia-Pacific markets, where demand exceeds that seen in the United States. As with platinum, its primary demand driver remains industrial rather than ornamental.

As energy and transportation policy shifts in both the U.S. and Europe, moving away from aggressive EV adoption targets, demand forecasts for internal combustion and diesel vehicle components are rising again into 2026. This resurgence is becoming a key catalyst for both platinum and palladium prices.

Additionally, both metals trade in relatively thin futures markets. Liquidity is limited, spreads are wide, and volumes are far lighter than in gold or silver markets. This makes prices far more sensitive to changes in positioning. Institutional investors have been structurally net short both metals for years, and as fundamentals improve, we are now seeing the early stages of a short squeeze. A combination of tightening supply, shifting policy trends, industrial demand recovery, and thin market structure is driving the renewed upside momentum in platinum and palladium.

This material is intended for informational purposes only and should not be considered a personalized recommendation or investment advice. Investors should review investment strategies for their own particular situations before making any decisions.

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