Asset Strategy, Market Insights

Should I Invest in Rhodium Metal?

Gold Alliance disclaimer

If you are interested in alternatives to gold and silver, you should take a look at the platinum group of metals. Last week, we discussed investing in platinum and palladium, but there is one other idea worth considering: investing in rhodium.

While, historically, a lot of attention has been given to gold and silver, the platinum group is now enjoying some time in the spotlight. As a result of the diesel scandal, platinum—which is widely used in diesel catalysts—is at a historic low. In fact, an ounce of platinum currently costs significantly less than an ounce of gold, which is a historically rare occurrence. On the flip side, palladium—used in gasoline engine catalysts—has had an impressive run.

Welcome to Rhodium

You may not be as familiar with rhodium, but, according to Lorena Baird of Baird & Co., it has become “incredibly popular with investors.” Rhodium is a hard yet brittle metal. While you can use a hammer to write your name on a piece of silver, Baird & Co. uses a machine that applies the same amount of pressure as if two elephants were standing on it to imprint its name. But, if you drop rhodium, it will break. It is not a common metal in jewelry, but because of its resistance to tarnishing, it is often used to plate other metals, such as silver.

Rhodium, a rare, industrial metal

The platinum group of metals are industrial metals—they correlate with industrial demand and aren’t considered reliable stores of value (such as a monetary metal as gold). The car industry accounts for around 80% of rhodium demand, mostly used for catalysts. Other demands comes from the glass and electronics industries.

Rhodium is found alongside deposits of nickel and platinum, and yearly mined production is only 21 tons—compare that with 200 tons for platinum. South Africa stands for more than 80% of global rhodium supply, while Russia supplies 15%. In 2008, the rhodium investment price rose to $10,000 an ounce due to geopolitical concerns and the commodities boom, but the price has since dropped dramatically.

Investing in Rhodium

When the financial crisis hit the world, car sales crashed, and the price of rhodium imploded, dropping by 90% within a few months. Within the past 12 months, the price has nearly doubled as of this writing, and likely its value today is even higher. Car sales have increased globally and are forecast to increase further over the coming decades. In other words, rhodium will likely not reach $10,000 again any time soon, but experts also don’t predict a huge drop.

Because of the limited supply of rhodium, the price is quite sensitive, and as a niche investment, there may not be a buyer readily available if you choose to sell your invested rhodium.