Palladium. The Other White Metal

For a growing number of jewelry manufacturers and retailers, pure Palladium is a new and viable alternative to white gold.

Sound familiar? At least once a week a customer walks into Missoula, Montana, jeweler Jim Adair’s store with a white gold ring that is going, or gone, yellow. To avoid a public relations disaster, Adair cheerfully offers to re-plate the piece with rhodium – for free, of course – always wondering when the customer will need another white-out.

No wonder Adair has always viewed white gold more as a devil’s bargain than a godsend. But with platinum’s price far above that of gold’s, he had no choice. Selling white gold has long been the only, even if not the best, fallback – an imperfect solution to the demand for an affordable white precious metal. As discontent with white gold has reached critical mass, however, refiners and manufacturers began seeking alternatives. These fall into three categories.

First come what might be called novelty metals like titanium that look good and feel comfortable but lack the essential attributes of gold and platinum: rarity and value. To many jewelers, novelty metals are the metallurgical equivalents of cubic zirconia.

Next come “karatized” platinum alloys, equivalent in purity to 585 and 750 gold. Many, including Adair, feel that lower purity platinum alloys throw out the baby with the bathwater. “Platinum’s reputation rests on its purity,” he says. “So selling impure platinum isn’t really much of an alternative to selling white gold.

Early this year, Adair got wind of a new 950 pure palladium alloy that was suitable for casting: “Tru-Pd” made by Hoover & Strong, Richmond, Virginia. The sample rings he was sent quickly convinced him that the new alloy was more than an alternative to platinum. It was a true co-equal.

In March, the jeweler began a makeover of his bridal department, stocking palladium bands from Frederick Goldman’s “Stillwater” collection and various Hoover & Strong engagement rings. By April, the department was white gold-free. As of June, and ever since, high-purity palladium jewelry accounts for 25% of his bridal sales, which is the percentage he used to count on from white gold. “Today, the breakdown is 25% platinum, 25% palladium, and 50% yellow gold,” Adair says.

Pause here to imagine a prosperous jewelry store without a single white gold bridal ring in it – except, of course, those left for whitening. “I’d hate to add up the cost of all the free re-plating I do every year,” Adair jokes. “Palladium spares me this cost, plus a lot of embarrassment.”

No wonder, then, that Adair’s chief reason for championing palladium – and he gives plenty of them, including price, purity, rarity, status and strength – is color. “Someday we will look back on the pre-palladium days and laugh when we think that we used a yellow metal as a substitute for a white one,” he says.

But what about those consumers who see advertisements for white gold jewelry and come looking for it? Isn’t it the retailer’s job to satisfy public demand? For Adair, that’s a little like wanting white sapphires to serve as diamonds. “Gold is the precious metal for those who want yellow and platinum is the precious metal for those who want white. Thankfully, platinum is a rather large family of metals. So I can offer pure palladium as both a replacement for white gold and an affordable alternative to pure platinum. Take your pick.”

Couldn’t Adair have chosen 585 or 750 platinum? After all, the world has learned to live with 14k and 18k gold. Can’t it make the same adjustment to platinum?

“No way,” Adair answers. “I would much rather make the case for pure palladium than impure platinum.”

Banishing white gold is heretical. Adair realizes he is at the front of a very short line. Yet he loves being a crowd of one and has complete faith in his decision. Indeed, he relishes his solitary status as one of the only jewelers to go 100 percent for 95 percent pure palladium jewelry. “While other jewelers are sitting on the sidelines waiting to see how well people like me do with palladium, I’ll have this Christmas pretty much to myself to introduce a fabulous new precious metal that answers all the problems of the one it replaces,” he says.

By Christmas, there will be a small multitude of jewelers offering palladium jewelry. QVC has already run several segments devoted to this new product and is offering palladium pieces on its web site. Fred Meyer Jewelers and Bloomingdale’s are about to test the same white waters. But these sellers are hanging on to white gold. Other firms like Sterling’s are rumored to be gearing up to sell palladium once they overcome technical reservations about the metal.

For now, Adair has the field pretty much to himself. And his attitude seems to be, the less the merrier. “I don’t mind being the guinea pig that proves the vaccine works. When palladium becomes popular, I’ll tell my customers I believed in it long before my competition did.” Is palladium yet worth this much belief?

The Price is Right

Palladium’s reputation as the other platinum is far older than you might think. According to Ofer Azrielant, President of New York-base Andin International, the metal was a pre-Colombian favorite among the Aztecs and Incas. Of course, he points out, palladium wasn’t palladium as such until the metal was identified as a separate element in 1803.

The history of palladium as a jewelry metal in its own right began with a false start around 1910 when it was used as an experimental alternative to formidably popular platinum. The metal got its second start during World War II when platinum was classified as a strategic metal and available only for military purposes. With platinum benched for jewelry use, firms like Tiffany’s substituted pure palladium, and for a time, the metal enjoyed some success. However, since it was more difficult to work, and price differentials between the brother metals were not extreme, it was something between a has-been and a scarcely-was by 1960.

Nevertheless, there were further attempts to revive palladium, one of them in the early 1970s when Hoover & Strong introduced a line of palladium stud earrings to take advantage of the metal’s lighter weight relative to platinum and, to a far lesser extent, gold. Although the company eventually abandoned its campaign, it never, says Torry Hoover, “gave up on pure palladium. We always thought the time would come when the jewelry world would need this metal.”

For such a need to take hold, the metal’s price would have to be right. Its price was decidedly wrong in 2000 when an ounce of palladium briefly cost more than platinum, shooting past the $1,000 mark. Blame investors for driving prices wild. Car makers use millions of ounces of platinum per year in emission control devices. Betting lower-priced palladium would become the auto industry’s preferred platinum alternative, speculators began a buying binge of the metal in 1999. The gamble made sense – until hoarding made palladium a senseless substitute by making it more expensive than platinum. After the bubble burst, prices settled to around $230.

That’s when palladium started singing a siren’s song to jewelry refiners and manufacturers. With platinum perpetually perched above $700, and gold trading over $400, palladium suddenly looked as good as the girl next door. So despite a five-week price run-up from $238 to $333 per ounce in March and April 2004, again fueled by speculation, palladium’s time to shine on its own was inevitable. By the time the second, briefer palladium bubble burst, Hoover & Strong, in conjunction with Andin International, were busy taming palladium for casting use. In the meantime, palladium had stabilized at a very affordable $230 per ounce.

Nowadays, palladium is a far better known platinum group member – mainly as an ingredient in white gold alloys. Between 2003 and 2004, according to GFMS, a precious metals consulting firm in London, use of palladium in jewelry nearly doubled from 363,000 to 713,000 ounces. China the world’s leading market for platinum jewelry, accounted for nearly all of the increased demand. Most of the 350,000 extra ounces went into high-purity palladium jewelry. This is astonishing when you realize that last year Chinese jewelry makers used only 938,000 ounces of platinum – 40 percent less than in 1999.

Contrary to popular opinion, China’s shift to palladium was not due to surging sales of white gold. GFMS estimates that only 40,000 to 50,000 ounces went into white gold alloys. The remainder went for 900 and 950 palladium.

Chinese consumers buy fine gold and platinum jewelry as much as an asset as an adornment. So while 18k white gold stole sales away from platinum there in 2004, Paul Walker, GFMS’s CEO, points out that 24k pure gold jewelry still commands the overwhelming share of market. That’s why he thinks high-purity palladium made such significant inroads. It’s seen as a precious metal by those buying it – as important for its bullion value as its beauty.

Walker says there’s another less publicized, but equally important reason for palladium’s quick start in China: margins. Because gold and platinum are seen mainly as wearable bullion, the markups on them in mainland China jewelry stores are less than 20 percent. Palladium margins, on the other hand, are currently just under 65 percent. “In a society just learning the joys of entrepreneurial capitalism,” he says, “markups that are three and four times those of gold and platinum are strong incentives to stock and support palladium.”

Palladium: Budget Platinum?

Because the palladium market is still in its infancy, it is too soon to say just how well it will do in America. Manufacturers seem to feel that palladium will be a mid-tier player in a three-tier price point market – with platinum on top, 950 palladium next, and white gold third.

Nevertheless, as palladium carves out a niche, it will either draw sales from platinum or white gold. Most makers of palladium jewelry have a hunch or a hope that it will eat into sales of the latter. “You don’t want to position palladium against platinum,” says Rebecca Foerster, vice president of marketing at Frederick Goldman, New York. For her, palladium has all the virtues of platinum with none of the vices of white gold. “It’s hypoallergenic, it won’t turn color, and it stays forever white.”

Just prior to beginning this story, I called ten independent jewelry stores across the country to ask about consumer resistance to platinum prices. Surprisingly, ever one of them told me that platinum sales were holding steady and that price wasn’t a deterrent to the decision to buy the metal. “My platinum customers are usually pre-sold on the metal,” says Howard Miller, a custom jeweler in Trevose, Pennsylvania. “They know it’s expensive but they also know it’s far rarer than gold. These customers are not thinking about alternatives. If they need to save money, they’ll settle for smaller or lower grade diamonds. The customer who is thinking about alternatives is far more likely to be one who is shopping for white gold and wonders if there’s some other precious white metal available.”

Miller, like most of the other independent jewelers I interviewed, felt that products like white gold, 585 platinum, or 950 palladium are the main choices vying for the consumer who is shopping for a platinum alternative. “The new product opportunities are for consumers who can’t afford or aren’t interested in platinum,” he says.

If this proves the case, then palladium is competing with white gold or karatized platinum alloys, and not platinum – at least for now. Who knows what consumers will think if palladium attains platinum’s prestige?

For the moment, manufacturers are concentrating their marketing efforts on jeweler familiarization. It is not always easy. “I planned the introduction of about 30 palladium pieces as a big surprise at the Las Vegas show, but it was more of a shock,” says Ed Zahrabian, president of Universal Fine Jewelry, Los Angeles. “I think now I should have given advance warning.” Zahrabian’s customers needed a short period of adjustment before placing their palladium orders with him. Yet even now, they are doing so with caution. “Right now, jewelers feel they are taking a chance when they buy palladium, but eventually they will see the logic and necessity for it,” he says.

The necessity has to do as much with reliability as price. “To me, white gold is like coated topaz – a yellow metal painted a bright white with rhodium plating,” says Azrielant. “For a little bit more money, the consumer can have the real thing, a true white metal that is rarer than gold and just as noble.”

Why is high-purity palladium more expensive than white gold if the metal costs much less? Zahrabian gives two reasons. First, palladium is far purer than white gold. Second, it costs more to alloy the metal and then properly cast it. Because of this price differential, many manufacturers are convinced the fine white metals market will be a three-way split between platinum, palladium, and white gold. Others say white gold faces a tough future if either or both palladium and karatized platinum catch on. Then the three-way split could be between platinum, palladium, and 585 platinum.

While some defenders of white gold claim that there are now alloys that do not need rhodium plating, this form of whitening remains the norm. To make matters worse, white gold alloys with nickel, which have been banned in Europe, are still common in America – raising the possibility of health issues for people with sensitive skin. Both platinum and palladium share superb hypoallergenic properties.

Pragmatism Versus Principles

High-purity palladium debuted in America at about the same time as karatized platinum entered the market. While some manufacturers feel retailers will choose one over the other, some see room for both in jewelry stores. “There is a whole new spectrum of white metal produce,” says Hoover. “I don’t see why a jeweler can’t offer a little of everything. Personally, I may believe more in pure palladium. But I don’t see any reason for not having the equivalents of 14k and 18k in platinum. It was only a matter of time before lower-purity platinum alloys appeared. That time is now.”

Such liberality strikes others as needless, if not dangerous. “Why do platinum standards have to become as watered down as those of gold?” asks Azrielant. “Platinum stands for purity. Rather than change this fundamental perception about the metal, why not use another metal from the platinum group that is equally rare and possesses all of platinum’s other strengths?”

Maybe it comes down to convenience. In an industry known for its conservatism, isn’t it easier to popularize lower-purity platinum than high purity palladium? Zahrabian answers no. “The quick success of palladium in China proves consumers are receptive to the idea that platinum is a family of metals, and that other members of the family share the qualities of its most famous member.”

Foerster agrees. “I am surprised at how quickly consumers are accepting palladium jewelry,” she says. “It tells me that the industry has done a very good job in educating the public about platinum.”
I’ll let Adair have the last word. “When it comes to precious white metals, the industry has always held itself to higher purity standards than with gold,” he says. “White gold has been an exception to that rule. Palladium gives us the chance to return to old uncompromising standards in the domain of white metals.”

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