Rhodium Outshining Precious Metals, Up 30%; Analysts Warn Of Volatile Market

Neils Christensen  

Tuesday March 28, 2017 14:47

(Kitco News) - Rhodium is gaining a lot of market attention as some spot exchanges show prices are pushing above $1,000 an ounce, its highest level since June 2015.

Johnson Matthey, a major rhodium refiner, shows spot prices Tuesday were at $1,015 an ounce, unchanged from Monday’s price.

However, some analysts warn that the market is notoriously small and that can cause significant discrepancies in prices. Rhodium price charts on Kitco.com show that rhodium is trading at a near-term high of $910 an ounce.

According to Kitco’s prices, rhodium is up 30% on the year, while Johnson Matthey shows a gain of almost 32% year-to-date. Regardless, at current prices rhodium is so far the best performing precious metal, outshining gold futures, up 9% since the start of the year; platinum future, futures are up more than 5.6% since the start of the year; and palladium futures, which is up 16.5% year-to-date.

Rhodium is a strategic metal that is used in catalytic converters, together with platinum and palladium and the market is so small that it only trades in spot markets – there are no futures contracts for the metal. Phillip Streible, market strategist at RJO Futures said that he is not surprised that prices are so high, as he expects demand is coming from Mexico, which is reporting record vehicle production.

In February, according to numbers from the Mexican Association of the Automotive Industry, country exported 240,909 vehicles, an increase of 9.7% compared to exports recorded in 2016.

“We are seeing Mexico buying a whole bunch of commodities to create stockpiles. They are ramping up production and selling their products to the U.S. with bulk discounts. This could be happening in the rhodium market as well,” he said.

Streible also noted that there is a huge spread between the bid price and the ask price in the spot market, which indicates that the rally could be a short-term phenomenon.

One New York trader said that because the rhodium market is so small there can be huge volatility and gains can evaporate just as quickly as they were made.

“This is just end of quarter buying. Someone has a little bit of money and is looking to spend. Once demand dries up the price can drop like a stone.”