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Rhodium Trading At 11-Year High, Up 35% YTD

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(Kitco News) - While investors are watching to see if gold will make a run back to its recent 10-month high, there is one precious metal that is testing an 11-year high.

Rhodium continues to be the unsung hero of the precious metals market as prices have pushed above $3,000 an ounce, hitting its highest level since early-October 2008. Currently, the price is up more than 35% since the start of the year with spot prices trading at a high of $3,120 an ounce.

Although rhodium prices remain extremely volatile because of its opaque marketplace, some analysts continue to see higher prices as the market continues to be dominated by growing demand and shrinking supply.

Bernard Sin, head of metals trading at MKS Group said that the same fundamental factors pushing palladium prices to record highs above $1,500 an ounce is also driving rhodium.

“As long as palladium prices continue to push to new highs, you will continue to see rhodium rally,” he said.

The auto sector dominates demand for both palladium and rhodium as both metals are critical ingredients in auto catalytic converters, which are used to reduce harmful exhaust emissions. Palladium is predominately used in gasoline engines, but rhodium is needed for both diesel and gas engines.

Ross Strachan, senior commodity economist at Capital Economics, said that while there is room for rhodium prices to push higher in the near-term, investors need to stay focused on declining auto sales across the globe.

He added that because of the market’s volatile nature, prices could easily give back all the gains it has seen this year. Strachan sees the same issues plaguing palladium prices with the firm looking for the metal to end the year at $1,050 an ounce.

“We just don’t think these heady prices are sustainable in the long run,” he said.

In a report from February, analysts at the precious metals firm Johnston Matthey said that they see a small surplus for the rhodium market in 2019 but could easily be absorbed by the auto sector.

The firm said that it’s less about auto sales and more about how much of the metal companies are using in their catalytic converters to keep emissions down.

“Consumption of rhodium in autocatalysts is forecast to see strong growth in 2019, as car companies increase PGM loadings in response to tighter emissions legislation and more stringent in-use testing,” the analysts said.

Analysts at Bank of America Merrill Lynch said that they see demand for rhodium increasing through the year as demand grows; however, because it’s an opaque market, they recommend investors look at its sister metal palladium. The firm said in a recent report that palladium could push to $2,000 an ounce this year because of the massive supply/demand imbalance.

Peter Hug, global trading director at Kitco Metals, said that he has been bullish on rhodium for the last three years when the price was trading around $1,200 an ounce. He added that his current target is for prices to hit $3,200 an ounce.

“We find ourselves today within $100 of the $3,200 target and we continue to remain constructive on the price,” he said in an email to Kitco News. “It is possible that we may experience a parabolic move similar to that of 2004, but I think it is more likely that a step approach to the $3,700 level is more likely.”

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.