How Do You Invest in Rhodium
Precious metals as an asset class tend to decrease in value as the stock market climbs. When consumer confidence is high in the stock-market, fewer people invest in metals, driving down the cost. The clear exception is rhodium. Rhodium has been deemed the world’s most expensive precious metal.
Rhodium is a rare by-product of mining platinum and has grown in popularity and value over the last decade. Mined primarily in South Africa, the precious metal is exceedingly rare, and most of the world’s supply is used for making catalytic converters for cars.
Some experts think that rhodium is poised for another price spike as automotive companies are stockpiling reserves as a hedge against future price spikes. Rhodium, due to its limited supply, cannot easily adapt to meet the ever-growing demand. When demand does increase, prices can quickly skyrocket.
Rhodium surged more than 30% in 2020, reaching its highest price since 2008. It remains strong into 2021, driven by a limited supply and strong buying in Asia.
Rhodium is part of the Platinum Group Metals (PGM), which also includes platinum, palladium, iridium, ruthenium, and osmium. These niche metals have been growing in popularity for investors in recent years. If you are ready to move past gold and silver and venture further into investing in precious metals, there are a few things you need to know about investing in rhodium.
Options for Investing in Rhodium
There are four options for investing in rhodium. Investors can choose to purchase:
- Rhodium bars
- Rhodium coins
- Rhodium-backed stablecoins
Physical rhodium is most often sold in bullion bars because the coins are difficult to mint given the high melting temperature of rhodium and its tendency to crack during the minting process. That said, if you want the convenience and the sleek and artistic look of a coin, rhodium coins may be right for you. Many rhodium coins on the market contain only a trace of rhodium, combined with other precious metals from the Platinum Group Metals list.
Just a decade ago, it was extremely difficult for investors to buy rhodium. Today, there are numerous ways to invest in rhodium. Investors can purchase physical bars, coins or invest in exchange-traded funds (ETF).
Precious-Metal Backed Stablecoins
Stablecoins are backed by various precious metals. Cryptocurrencies backed by precious metals are gaining popularity among investors as they offer a semblance of stability in an otherwise volatile market. Rhodium Coin offers one of the only stablecoins backed solely by physical rhodium using the Ethereum network.
However you choose to invest in rhodium, it is crucial to compare prices across various suppliers, as they can differ dramatically. ETFs dealing in rhodium is still relatively new, and experts advise that you do careful research. There can be a substantial disconnect between the paper market’s size and the physical metal that backs the exchange.
Why Physical Rhodium is so Valuable
Rhodium is among the rarest metals on earth and a vital component of the multi-trillion dollar global automotive industry. The versatile metal is also used in optical instruments, electrical connections, jewelry finishes, and aircraft turbine engines.
Rhodium-plated jewelry has become less popular as the demand for the metal has grown. However, a plating of rhodium is still frequently used when photographing jewelry as it gives it a shine that is difficult to achieve with other means and can drive up the price of the piece.
As the world pushes harder toward clean energy sources, the value of rhodium is poised to climb. It is a crucial component used by the automotive industry to produce lower emissions. Rhodium in catalytic converters reduces nitrogen oxide emissions, which have unfavorable effects on human health, agriculture, and ecosystems.
Rhodium is not currently exchange-traded, making it one of the few metals that adhere strictly to supply and demand principles. Given that demand seems likely to continue to increase and the supply cannot keep pace because of its rarity, most experts agree that the price is poised to continue to climb for the foreseeable future.
Given that there is no current substitute for rhodium, and it seems unlikely that supply will increase, adding rhodium to your physical assets investments will help create a diversified portfolio.