This Is The Shining Star In The Precious Metals Market
(Kitco News)- It’s not all doom and gloom in the precious metals market asthere is one metal that is significantly outperforming the sector.
Rhodium is garnering new attention in the marketplace asprices are hitting their highest levels in seven years. Spot Rhodium onKitco.com pushed to $2,000 an ounce Thursday and is up 26.5% since the start ofthe year. In comparison, gold prices lack momentum, with prices continuing to hover aroundfive-month lows, last trading at $1,288.70 an ounce, down 1% since the start ofthe year.
According to one trader at a European precious metalscompany, Rhodium is benefiting from growing supply concerns in the platinummetals market. The trader noted that lowplatinum prices in South Africa are weighing on mining production.
“The prices is up because companies are scrambling to buythe metal and buildup their inventories in case there is a disruption insupply,” the trader said
Rhodium is classified as a platinum group metal, and 85% ofthe metal’s demand comes from the auto sector as it is a component in catalyticconverters. Analysts have noted that Rhodium is a fairly small liquid marketand is prone to high volatility. The metal is traded in cash markets and doesnot trade in future markets.
The consistent uptrend in Rhodium comes as analysts expect tosee a record drop in 2018 demand. Johnson Matthey, the world’s largest secondaryplatinum group metals refiner, projectsfor overall demand to fall 3% this year; however, it notes that this might notweigh on prices as consumers are looking to the future.
“The prospect of future increases in automotive demandmay stimulate further speculative and strategic buying. If this should occur,rhodium availability could remain tight, even though our supply-demandestimates suggest that the market is likely to move back into surplus in 2018,”the analysts said in their report.
In a telephone interview with Kitco News, Jeffrey Christian,managing director at CPM Group, said that while demand might be declining thisyear, there is still an overall uptrend in the market.
He noted that auto sector demand for rhodium has seen2.8% aveage growth in the last seven years. Not only is demand picking up, butsuppliers are holding on to the metal as there are indications that inventorylevels have fallen to critical levels.
“I think prices can continue their upward trend and willprobably have to get much higher to loosen market supply,” he said. “You’ve gotthis captive fabrication demand that is rising and not a lot of supply, soprices can move higher.”
However, Christian added that the market is completelyopaque and would recommend that investors stay away from it.
“It’s easy to buy rhodium but it is incredibly hard tosell,” he said.
While rhodium is testing a seven-year high, the price isstill dramatically down from its $10,000 an ounce peak in June 2008.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.