Rhodium Investment Fundamentals

In the world of crypto, there is a special kind of digital currency called a ‘stablecoin’. This is a cryptocurrency whose value directly ties to a valuable asset. This asset could be fiat money, oil, or precious metals such as gold and silver. Basically, anything that has tangible value. The formation of the price of a stablecoin correlates with the asset it is backed by.

One of the cryptocurrencies that are pegged to an asset is RhodiumCoin. It is an ERC-20 cryptocurrency that is backed by the metal rhodium, as its name states. It is also built on the Ethereum network. This is the first fractionalized rhodium-backed asset that is available for purchase directly in national currencies or cryptocurrency. Because of its fractionalized nature, investors can purchase any amount of RhodiumCoin whenever they want to.

The team behind RhodiumCoin is made up of individuals with sizable experience in various fields. The more prominent ones include traditional finance, legal awareness, IT, international banking, and of course, cryptocurrency and blockchain technology. They intend to create a highly accessible rhodium-backed digital asset that is also simple to use. It will give the investor direct exposure to physical rhodium while simultaneously benefiting from frictionless money’s flexibility.

Is this cryptocurrency worth investing in? And for that matter, is rhodium a precious metal that is reliable enough to connect to your assets? This article will take a closer look at the metal to answer that.

What is Rhodium?

Deemed as one of the most expensive metals in the world, rhodium is a rarer commodity than silver and gold combined. It was discovered after being isolated from platinum and is a glittering, crisp silvery-white reflective metal. These characteristics mean that it is resistant to decay. Moreover, they make rhodium the ideal metal to make jewelry and include in investment portfolios for diversification.

The person responsible for this precious metal’s discovery in 1803 was William Hyde Wollaston. He was coincidentally the same scientist who discovered another precious metal, palladium. Following the aforementioned isolation, Wollaston saw that rhodium was hard, highly reflective – almost mirror-like – and resilient to corrosion.

Rhodium is commonly used in several other industries, though it is to a lesser extent:

• It catalyzes producing nitric and acetic acids in the chemical industry
• Provides protective coating on jewelry pieces in order to shield them from scratches and discoloration
• It is a glass strengthening alloy

Furthermore, the metal consists of a comparatively higher melting point than platinum and other precious metals within the platinum family. Other metals in this group include the titular platinum, palladium, ruthenium, iridium, and osmium. These platinum group metals are lumped together due to sharing similar chemical and physical properties.

This metal is solely found in small portions and within platinum or nickel. Because of this, mining rhodium is a difficult task. The largest producing mine in the world is in South Africa. Here, on an annual basis, they produce up to 20 tons of rhodium or 80% of the world’s annual supply. This is a small amount by comparative standards and is what establishes the average value of rhodium; six times more than that of gold to be exact. The combination of higher value and lower global supply makes coins that contain or are made of rhodium more valuable than other coins.

Rhodium Supply

In 2019, the mined supply of rhodium would surpass 750,000oz, and recycled supply was 315,000oz. This resulted in a shortage of approximately 50,000oz. Generally speaking, rhodium supply is inelastic to demand, so if demand were to increase, there is no fast way to amplify production or supply. Why this is the case has an array of explanations. By far, the biggest reason is that rhodium content in Earth’s crust is extremely scarce. Moreover, the metal is mined as a by-product of platinum and palladium mining. Alternatively, it is the by-product of nickel mining.

For clarification, there is no such thing as a principal rhodium mine, and the location of the major producers is in South Africa. This nation is not the only one generating rhodium, though. The Russian Federation produces the next largest percentage of the world’s rhodium supply, which is roughly 12% annually. The U.S. and Canada also mine rhodium, with their percentage being about 3%. Zimbabwe mines approximately 4% of the world’s yearly rhodium supply.

There is a very deep nature to the aging mines in South Africa that produce by-product rhodium. Due to this, the metal supply has shown to be largely sluggish in recent years. Platinum is in oversupply and is gradually dropping in price ever since 2015. Therefore, the South African mining companies are face-to-face with a conundrum. Should these companies opt to mine more platinum to exploit the by-product rhodium, then there is a chance of oversupplying the platinum market. Not only that, but it could also depress prices further.

Rhodium Demand

Rhodium is trading at its highest level since 2008 after surging over 30% this year. This rise in demand is courtesy of the automotive industry. Similar to various other precious metals like platinum and palladium, rhodium is frequently used in catalytic converters. These are a crucial component in auto exhaust systems that cut down on toxic gas emissions. To be specific, more than 80% of the demand for rhodium and palladium stems from this particular industry.

With the constraints of rhodium supply and the auto industry focusing heavily on tightening emission standards, there is an evident risk at play. There is a chance that the market may completely flip into a deficit. Going beyond commercial demand, investor interest in rhodium is also on the rise and continues to increase.

Rhodium is a considerably less liquid market. Thus, during periods of high demand, the price will often move rapidly. However, large jumps in the price may suggest that panic buying is occurring, meaning that large quantities are being bought due to fears of a forthcoming shortage or price increase. If this turns out to be the case, then the price could potentially cool off for a while as soon as the buyers with urgent requirements can acquire the metal they need.

Pros and cons of investing in rhodium

There are plenty of pros that come from investing in rhodium. For starters, as mentioned earlier, rhodium is a rare precious metal that resembles silver in appearance. Chemically, though, it is more like platinum. The asset’s rarity is what makes it incredibly valuable. In fact, the reason why this metal has many enthusiasts is that they seldom see it under the four-figure price range. It possesses a certain level of volatility that is incomparable to other assets, too. This can either be a pro or a con, depending on the investor.

It is important to remember that rhodium is a popular material for automotive companies to use. Automobiles are not going anywhere for a very long time, so it is usually a safe investment to go forward with. Also, because it is a rare metal, car companies will surely purchase it in bulk whenever the price declines. Vigilant investors will also invest around that time, knowing that the price will skyrocket when auto companies buy.

Those who don’t like the idea of paying a huge fee for physical bullion are allowed to invest in a bar of mixed metals, which includes rhodium. However, these are limited options and are only available in certain areas.

Rhodium is also available in the form of a coin. It should be noted that this method is costly because of the asset’s high melting point. Be that as it may, investors who can afford it appreciate the diversity.

For all the advantages, there are of course a few disadvantages as well. While rhodium is relatively valuable, its price is quite volatile. During the mid-2000s, the price ranged from $400 to the $10,000 price point. Since then, it has been bottoming at approximately $1000. However, 2020 would see an 11-year high for the precious metal. To reiterate, whether this volatility is a pro or a con is up to the investor. They must be mindful of the asset price because of it.

Rhodium’s rarity could also make it hard to purchase large quantities of it all at once. Overall, it is without a doubt, an asset that investors should purchase if they can afford a reasonable amount of it. It is critical to keep in mind that it is not ideal for short-term gains, regardless of its volatility. Nevertheless, if an investor can hold it in the long-term, then rhodium should still be appealing.

Only recently has rhodium become available in ETF or futures formats. It is also tricky to physically acquire the asset that is invested. This means that the investment options are limited, so if either of these options is important to the investor, then they should look at another precious metal.

Investing in Rhodium

The easiest way one can purchase rhodium is online, which can be done in either a coin or bullion bar format. Bars are comparatively cheaper, but they can also be expensive to properly put into storage. Coins, on the other hand, are easier to store yet harder to find and mold.

Depending on where you purchase from, you can buy rhodium in an array of fractional amounts, too. These are by far the most popular methods to buy because you are not required to commit to an entire rhodium bar. As mentioned earlier, rhodium ETFs and futures have been made available. But again, only the most committed traders should participate in this due to the metal’s volatility

Rhodium is indeed a rare and expensive asset, though investing in it is quite advantageous. The catch is that it is not accessible to all. Thus only investors who can afford it can make it part of their portfolio.