Palladium vs. Platinum: Key Differences

Palladium and platinum are often mentioned in the same breath, and for good reason. Both belong to the platinum group metals (PGMs), both are used in automotive catalytic converters, both come primarily from South Africa and Russia, and both are approved for self-directed IRAs. To the casual investor, they might seem like near-identical assets with different names.

They are not. Beneath the surface similarities lie meaningful differences in supply concentration, demand profiles, historical price behavior, and long-term outlook. Understanding those differences is essential for any investor who wants to take a deliberate position in either metal rather than simply picking one arbitrarily.

Supply: Where They Come From and Who Controls It

Both metals are mined primarily in two countries, but the balance of that concentration differs in important ways.

Platinum’s supply is dominated by South Africa, which produces roughly 70 to 80 percent of the world’s platinum. Russia is a secondary supplier at around 10 to 12 percent, with minor contributions from Zimbabwe and North America. The South African supply is concentrated in a single geological formation, the Bushveld Igneous Complex, and is vulnerable to labor disruptions, power shortages from South Africa’s state electricity utility Eskom, and political and regulatory risks specific to the South African mining sector.

Palladium’s supply is more evenly split between Russia and South Africa. Russia (through Norilsk Nickel, which produces palladium as a byproduct of nickel mining) accounts for roughly 40 percent of global supply. South Africa accounts for another 37 to 40 percent. This means palladium has two distinct and politically sensitive supply sources rather than one, creating a different geopolitical risk profile.

The practical implication: both metals are vulnerable to South African mine disruptions. But palladium has the additional layer of Russian supply risk, which became highly visible following the 2022 Ukraine conflict and associated sanctions environment.

Demand: Same Industry, Different Engines

The most important distinction between palladium and platinum for investors is which type of engine each is used in for catalytic converter applications.

Palladium: Gasoline Engines

Palladium is the preferred catalyst metal for three-way catalytic converters used in gasoline-powered vehicles. These converters simultaneously reduce hydrocarbons, carbon monoxide, and nitrogen oxides. Palladium’s physical chemistry makes it more effective than platinum for this specific gasoline-engine application at typical operating temperatures.

Because the global vehicle fleet has historically skewed heavily toward gasoline engines — particularly in the United States, China, and most of Asia — palladium has faced the highest demand from the automotive sector. This explains much of palladium’s dramatic price surge in the years leading up to 2022: tightening emissions standards in China and Europe required more palladium per vehicle at a time when supply was constrained.

Platinum: Diesel Engines

Platinum is the traditional catalyst of choice for diesel engine catalytic converters, which use a different chemical process (selective catalytic reduction) that favors platinum’s properties. Platinum is also used in diesel particulate filters.

The dieselgate scandal in 2015 — triggered by Volkswagen’s emissions cheating revelations — accelerated a shift away from diesel passenger vehicles in Europe, which had been a major market for diesel-powered cars. This hurt platinum demand materially. European automakers’ pivot toward gasoline and electric vehicles reduced demand for platinum catalysts precisely when palladium demand from gasoline engines was accelerating, contributing to the divergence in their price paths.

The Electric Vehicle Factor: Who Is More Exposed?

Both metals face demand headwinds from the electrification of passenger vehicles. Battery electric vehicles (BEVs) do not have internal combustion engines and require no catalytic converters. As BEVs become a larger share of new vehicle sales, demand for both palladium and platinum from the automotive sector faces long-term pressure.

However, some analysts argue that platinum may actually be better positioned than palladium in a world moving toward clean energy. Platinum plays a key role in hydrogen fuel cells and electrolyzers — technologies central to the green hydrogen economy. If green hydrogen takes off as a significant energy vector over the coming decades, platinum could see substantial new demand from this sector. Palladium has a more limited role in hydrogen applications.

Additionally, platinum is used in diesel vehicles, and heavy commercial vehicles (trucks, buses, trains) may continue to rely on diesel-like powertrains for longer than passenger cars, providing a degree of continued support for platinum’s automotive demand base.

Price History and Current Relationship

The price relationship between palladium and platinum has shifted dramatically over the past decade and a half. For many years, platinum commanded a premium over palladium, reflecting its greater rarity and broader industrial use profile. The two metals have traded near parity at various points, and for several years palladium commanded a significant premium — at its peak in early 2022, palladium was trading above $3,000 per ounce while platinum was below $1,100.

More recently, palladium prices have corrected sharply from those highs as investors began pricing in the long-term EV transition risk. The palladium-to-platinum ratio has compressed significantly. Some analysts now argue that platinum, historically trading at a premium to palladium, looks attractively valued relative to palladium at current prices.

Whether this spread reverts to historical norms, continues to compress, or moves in the other direction depends heavily on the pace of vehicle electrification, the health of global auto production, and the speed at which hydrogen economy infrastructure develops.

IRA Eligibility and Physical Ownership

Both metals are IRS-approved for self-directed precious metals IRAs at a purity threshold of 99.95%. Both have IRA-eligible coins from the U.S. Mint: the American Platinum Eagle and the American Palladium Eagle (introduced in 2017). Physical bars meeting purity requirements are also available from major refiners for both metals.

Physical palladium has historically been harder to source in small quantities than platinum, and bid-ask spreads can be wider. Both metals carry storage and insurance costs when held outside of an IRA through a depository.

Which Metal Is the Better Investment?

There is no universal answer. Palladium offers higher volatility, tighter near-term supply constraints, and exposure to Russia-related geopolitical risk. It is the higher-risk, higher-potential-reward metal in the near to medium term, with a more uncertain long-term demand profile due to BEV adoption. Platinum offers a somewhat more diversified demand base (automotive, chemical, hydrogen, medical), a longer history as a monetary and investment metal, and what many analysts currently view as a more favorable valuation relative to both gold and palladium compared to historical norms.

For investors who believe in the hydrogen economy thesis and want exposure to industrial metal dynamics with a longer time horizon, platinum may be the more interesting position. For investors who believe near-term supply deficits and emissions regulations will continue to support PGM prices and are comfortable with Russia-related supply risk, palladium may offer more near-term price torque. Many thoughtful investors hold both.