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Rhodium is one of those elusive precious metals that can baffle investors and asset managers. It is rare, pricey, and volatile.
Jewelers often apply a rhodium layer to white gold and sterling silver to enhance the appearance and prevent tarnish, but 80% of world production is dedicated to automotive catalytic converters.
In the wake of the world economic crisis in 2008, rhodium hit an all-time high at $10,025 per ounce as money shifted into the traditional bear market safe haven, only to plummet 90% before the year was over. After bottoming out around $600 in 2015, rhodium reached $29,000 in 2021.
As is true of all investments, putting all your money into rhodium bullion is not the thing to do. On the other hand, if you are looking for ways to add to your precious metal holdings, getting into rhodium might be the best way to diversify.
Before you jump on the bandwagon and get a few rhodium bars or coins, you need to have a better understanding of the metal itself.
In the first place, rhodium is extremely rare and extracted in only a handful of mines in the world. There are some rhodium mines in Russia, Canada, and the US, but 80% of the production comes from South Africa. Estimates show that rhodium comprises only 0.0002 parts per million in the Earth’s crust, which makes it one of the rarest metals in the world and this is reflected in its premium price.
Scarcity, limited supply, and high demand are among the top reasons for the price spikes of rhodium. Most of the industrial demand comes from the automotive and technology industry. The automotive industry uses rhodium as catalysts in gasoline-powered cars and the metal has also found application in consumer electronics glass.
However, the increasing use of rhodium in the automotive and technology markets is not the only reason for its price volatility.
As previously mentioned, the supply of this metal is very short and concentrated. Since more than three quarters of the metal comes from Africa, the current economic and political situation can cause the price to move. You also need to factor in market speculations.
At one point, the spike in rhodium prices was caused by both automotive industry demands and Wall Street trading. It is believed that Wall Street speculators and precious metal investors got neck deep into rhodium and caused the prices to skyrocket before they came back to a more reasonable value.
The onset of the 90’s also saw a huge increase in the price of rhodium, but this spike had nothing to do with trading or demand. Quite the contrary, it was caused by consecutive strikes of miners.
The simple answer to this question is yes, you should for sure, despite the metal’s volatility. But when it comes to precious metal investments, things are not always as simple as they seem. Thus, it might be better to rephrase the question to: Why should you invest in rhodium bullion?
Here’s why. Rhodium bullion is a great anchor investment. When you purchase rhodium, you are aiming for the long-term protection of all your precious metal assets. From a historical perspective, gold, platinum, and silver bullions have been the premium investment options but they should be viewed only as a part of your portfolio.
A well-rounded bullion portfolio means that you have some assets in each of the precious metals. Gold is the stable standard, silver is particularly interesting because it is likely to spike in price, and platinum offers a premium returns because of its rarity. However, rhodium is in a category of its own.
Rhodium is even rarer than platinum and much more valuable than gold. The potential gains far exceed those of other precious metals. Frankly speaking, novice investors are likely to be apprehensive about the volatile nature of this metal. But they shouldn’t.
New rhodium deposits and mines won’t sprout like mushrooms after the rain. As technology progresses, there will be more industrial applications of metal. In addition, governments and banks are shielding the metal from any weakness in PGMs (platinum-group metals, which rhodium is a part of) so the prices should remain stable in the foreseeable future.
Overall, a wise piece of advice would be to invest in rhodium bullion. However, you should always keep diversification in mind. This is true not only of rhodium or other precious metal investment but all investments in general.
Rhodium bullion is available in bars or coins. It should go without saying that you need to obtain the bars or coins from a trusted supplier like Money Metals.
It is also worth remembering that rhodium bullion is a long-term investment. Therefore you shouldn’t make any hasty decisions and jump at the first opportunity that comes up. Weigh all of your options carefully and don’t be afraid to look around before you find the bars or coins that perfectly match your portfolio.
Overall, investments in rhodium can be volatile but always keep in mind the rarity of this metal. So no matter how volatile, rhodium will always have value. You will be shielded from catastrophic financial scenarios like owning stocks in a company that goes bankrupt or holding the currency of a government that collapses.
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