The World's Most Precious Precious Metal
Source: MoneyWeek, Mark O'Byrne (8/24/09)
"Neither Wall Street nor the investment public is particularly aware of rhodium. . ."
The metal in question is rhodium, which belongs to the platinum group metals (PGM) along with platinum and palladium. Besides being a key component in the car industry, some of rhodium's other principal uses are in glass making; as a finish for mirrors and jewelry; in electrical connections; and in aircraft turbine engines.
Rhodium's price performance has been very volatile in recent years. Its average price in 2003 was some $530/oz. Lack of supply led to a massive move up in price until 2008 when it briefly reached just over $10,000/oz.
Annual world production of rhodium is extremely small. Johnson Matthey estimated that rhodium supply was 696,000 troy ounces in 2007, falling to 574,000 troy ounces in 2008. And this year, precious metals consulting firm CPM expects the supply to be down 3.1%.
The annual production of rhodium is a mere 1% of gold's, yet its price is only about 50% more than gold (some $1,600/oz versus some $940/oz for gold).
With 82% of world rhodium supply coming from South Africa and 14% from Russia, resource nationalism could become an issue. Resource nationalism, protectionism and the threat of nationalization could lead to export duties and export controls being introduced, thus the supply of rhodium could be greatly hampered.
Rhodium is a non-exchange-traded commodity; therefore, it cannot be bought on margin like other commodities. Rather, investors must opt for the far more conservative and safer route of owning the actual physical metal itself rather than paper derivatives. Unknown to most, investors can buy rhodium in metal form from specialist bullion dealers and store it in depositories internationally.
Neither Wall Street nor the investment public is particularly aware of rhodium, and only a tiny handful of investors and institutions internationally have it on their radar.
Rhodium merits an allocation within the precious metals allocation of a properly diversified portfolio.