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Commodity Investors Now Turning their Attention to Rhodium

When I was at the Hard Asset Investment Conference in New York a few weeks ago, every hour someone would stop by my table, mention the word "rhodium", and walk away.

My interest piqued, I decided to look into this mysterious metal. Rhodium (Rh) is in fact the rarest precious metal in the world, and is also the most valuable.

The white metal is used primarily as a catalytic convertor by the auto industry as a much more efficient alternative to platinum and palladium. It is also used in jewelry, the plating of mirrors, and in neutron flux monitors in nuclear power reactors.

South Africa produces 80% of the world's meager 25 metric tonne annual supply, and therein lies the angle.

Rolling power shortages in the country has lead to the same intermittent mining stoppages that have affected the other metals. On the demand side, you can count on a US auto industry that is boosting production from 9.5 million units to 15 million units over the next five years to maintain a firm bid.

As a result, rhodium has nearly tripled in the past six months to $2,500/ounce, but is still well shy of its $10,000 record high.

Rhodium Price

Rhodium is not exactly easy to buy. There are no futures contracts, and most of the physical production is tied up in long term contracts. Since the metal is so unbelievably hard, it is difficult to work with, and only one company, the Cohen Mint, is offering .999 fine coins and bars (Website: http://www.goldfortomorrow.com/ ). 

But expect to pay a hefty spread over spot, up to 20%, that is standard for a single source supplier.

A more liquid option can be found through buying the shares of the largest rhodium miners, which often appears alongside platinum, like Anglo American (AAUKY.PK), North American Palladium (PAL), or Stillwater Mining (SWC). And don't tell anyone I told you.

 

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By. Mad Hedge Fund Trader

 


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