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Rhodium's Investment Opportunity

The Rare Earth Element is Set to Make a Comeback by 2013

Posted November 22, 2011 at 10:07AM

Rarer than gold yet cheaper, rhodium is predicted to have solid medium-term prospects.

Just how rare is rhodium? “Last year, 114 ounces of gold were mined for every ounce of rhodium, according to Deutsche Bank,” says The Wall Street Journal. RhodiumElement

Rhodium has fallen to just under $1,700 an ounce form more than $10,000 when it hit its peak in June 2008. Although rhodium is a cousin to platinum, it fell 31 percent this year whereas platinum fell less than 10 percent.

The demand for rhodium has been hurt by the Japanese tsunami that destroyed carmaker supply chains, and from the economic problems plaguing the West. Three quarters of rhodium demand comes from automotive catalysts, says the Wall Street Journal.

“Erica Rannestad, an analyst at commodities consultancy and investment bank CPM Group, reckons rhodium consumption will grow by less than 5% this year against a 7% increase in supply,” reports the Wall Street Journal.

Rhodium is so rare that it actually becomes less appealing to investors. Its market is worth only $1.2 billion at today's price, very small in comparison to gold and platinum.

In May, a physically backed rhodium exchange-traded fund was started, and that inspired more interest. “But its market capitalization of about $10 million limits its impact,” says the Wall Street Journal.

Although rhodium may not sound like the first pick for an investment choice, it is said to have solid medium-term prospects.

“Rhodium is particularly suited to gasoline-powered vehicles that dominate major automotive markets outside Europe,” says Wall Street Journal. As global demand for vehicles continues to increase and emissions standards become stricter, built up surpluses of rhodium will begin to diminish.

The Wall Street Journal says by 2013, rhodium’s rarity will sustain its pricing. Now is the time to seize the investment opportunities that rhodium can offer.

That's all for now,

Cori

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