The Palantiri, also known as the Seven Seeing Stones of Middle Earth, were created by the Numenoreans as a way to communicate telepathically across their kingdoms, and as a way to watch over the past, the present, and the future. It allowed them to build vast and great lands, keep their people safe, and predict the plans of their enemies and usurpers. But in the wrong hands, the Palantiri become dangerous weapons, used to corrupt and break the minds of those who wield them. Sauron is able to gain access to and control the Palantir in Minas Ithil, when he takes the fortress and turns it into Minas Morgul. In doing so, he is linked to all the other Palantir in existence.
This is how he is able to corrupt Saruman the White, when Saruman begins using the Palantir to try to predict Sauron’s plans and learn about the rings of power after Galadriel banishes the dark lord on Dol Guldur. The Palantir is also how Sauron begins to influence and derange Denethor, the Steward of Gondor, in order to weaken the bond between the kingdoms opposing him. Through Denethor, he is able to make the kingdoms squabble among themselves rather than uniting in the common cause of defeating him and the hoard of orcs that he is amassing behind the Black Gates in Mordor.
There is at least three confirmed locations for the Palantir in the Lord of the Rings films. These include the aforementioned Minas Morgul, Minas Tirith, and Orthanc in Isengard. However, fans has spotted another of the seven stones hidden in the background of one of the scenes in The Hobbit trilogy.
At one point, Gandalf ventures to the fortress of Dol Guldur to learn the whereabouts and the fate of Thrain, Thorin’s father. When he first ventures into the thorny ruins, he comes across a statue in the center of a stone courtyard that looks like a cloaked figure. In the statue's hand is clasped an orb covered in dust. In the original scene filmed by the cast and crew, Gandalf gets a terrible, foreboding feeling as he blows the dust from the ball and realizes what the terrible object is. Despite this, he knows he must read it and understand the full extent of the danger ahead, so he places his hand upon it.
In the same way that Pippin is shown a vision of the white tree in Minas Tirith burning, and Aragorn is shown an image of Arwen dying as her fate is tied to that of the One Ring, Gandalf is also presented with foresight when he engages the Palantir. In a deleted scene, vision was planned to involve an alliance between Sauron and Smaug, and the desecration and ruin that the mighty dragon would wreak when combined with the toxic influence and will of the dark lord. Smaug would be Sauron’s most powerful ally, greater than all the wraiths and their Fell Beasts, greater than all the armies of orcs put together, and would wield a terrible and deadly flame that could lay waste to all of Middle Earth in the blink of an eye. Gandalf was then to fall backwards in shock and despair, and later be rescued by Galadriel and the other members of the White Council as normal.
Although it was filmed, this cut scene didn’t appear in the movies because of time constraints and more attention being paid to the main storyline involving the thirteen dwarves in Erebor. However, the Palantir can still be seen in the statue’s hand in the background of many shots during the battle against the necromancer that takes place in Dol Guldur.
Perhaps if Gandalf had taken this Palantir with him, he could have prevented some of the difficult things that happen in the War of the Ring 60 years later, like the perception of Faramir in the belittling eyes of his father, or Saruman's turning to the side of evil. But Gandalf is too wise and too knowing to try to use the Palantir and bend it to his own will, even then, before Sauron has gained much of his power.
It is possible that he would have been able to wrest the Palantir from the dark lord’s control, like Aragorn does as the true heir and the descendant of Isildur. Of course, it is also possible that Gandalf would be overcome, and that his mind would be shattered like Pippin’s almost is, or that the dark lord would glean as much information from the wizard as the wizard could get in return, which would be equally dangerous. For him, the risk is too great. No one actually knows what happens to this Palantir in Dol Guldur during the years that follow, until Sauron is defeated and they are all destroyed.