Why is palladium used for the arc reactor?

Tony creates the Palladium Mini-Arc Reactor Mark I to power the electromagnet keeping shrapnel from reaching his heart in lieu of a car battery. He later uses it to power his Mark I suit, but upgrades to his Mark II reactor and abandons this one. read more

Maybe because Tony Stark’s arc reactor is a nuclear fusion reactor(just like sun but extremely small) .And you need hydrogen as fuel to run a nuclear fusion reactor. Palladium is an excellent hydrogen absorber. It can absorb up to 900 times its own volume of hydrogen.(reference below) Simulations of Palladium-Hydride. So palladium may have been used to absorb hydrogen from the surrounding and to store hydrogen for further use. read more

The Arc Reactor was a power core made out of palladium, and was the initial power source of the first Iron Man Mark suits, and was later modified to an advanced level by Tony to power his suits, as it kept on improving. read more