Rhodium surprised analysts with its performance in 2020 and appears poised to remain strong deeper into 2021. The demand took a hit in early 2020 when China’s coronavirus lockdown became headline news. After the first quarter, the market rebound has been steady.
Rhodium is mined as a by-product of platinum, attracting a small but active market. You can buy rhodium online, as long as you do thorough research into sellers of physical rhodium before investing.
If you are looking to buy physical rhodium, you need an understanding of the metal and why it is so valuable.
How to Buy Rhodium as an Investment
Rhodium is sold in bullion bars and coins, though the coins are far rarer and more costly. The minting process is challenging when using rhodium, making coins harder to manufacture. Rhodium has a high melting point and is extremely hard, resulting in cracks and other defects when attempting to mint coins.
Bullion bars are the most popular and accessible way to buy physical rhodium. Only a few Mints sell rhodium bars and coins, which contributes to keeping the market small.
Buying rhodium online is the easiest way to purchase the rare metal. Some Mints offer rhodium in various fractional amounts, making it possible to own physical rhodium without the expense of purchasing an entire bar. Fractional purchases are the most popular for those choosing to add rhodium to their investment portfolio for the first time.
Physical rhodium is not the only option for investing in the metal. There are also stablecoins backed by rhodium if you are experienced in cryptocurrency. Stablecoins, backed by tangible assets like precious metals, are viable options for those wanting to invest in precious metals without the hassle of storing or transporting the bars.
What is Rhodium
Rhodium is a rare metal extracted from only a handful of mines around the world. Discovered in 1803, it belongs to the platinum group metals (PGM) that have similar physical properties. Most of the world’s rhodium (80%) is used to manufacture catalytic converters on automobiles.
Approximately 28 tons of rhodium are mined annually. Over 220 tons of platinum and 2,300 tons of gold are taken from the earth each year, making rhodium among the rarest of precious metals.
Rhodium was once used extensively as a thin plating on jewelry, giving it an illustrious look of platinum or white gold. The practice of using rhodium on jewelry has declined in recent years for a number of reasons. The metal’s value has increased exponentially, making it a less cost-effective plating for inexpensive jewelry, and there is some concern that the process of plating it onto brass can form toxins.
Pros and Cons of Investing in Rhodium
Rhodium can be a tricky asset class that benefits some investors. Rhodium is usually recommended for experienced investors or those who have done thorough research. It is expensive and can be volatile in its market value. That said, rhodium is emerging as a strong contender to standard precious metals like gold and silver.
The pros to investing in rhodium include:
- The demand from the auto industry, coupled with the limited supply, offer the promise of long-term stability
- There are frequent price fluctuations, meaning you can buy when the price is down to add further diversity to your portfolio
- Rhodium is seen as a good long-term hedge against inflation
As with any investment, there is also a downside. The cons to investing in rhodium include:
- The majority of rhodium is mined in South Africa. While the region is currently free of excessive geopolitical turmoil, the metal’s value will remain tied to the stability of the region
- The investment is known for its short-term vulnerability to price fluctuations
- The market for rhodium is small and volatile. Investors should have the risk-tolerance to ride out ups and downs in the market to invest in rhodium as a physical asset. When looking to sell, remember that the market is small, so selling the asset may take longer than it does with other popular precious metals
Most rhodium bars come sealed in tamper-proof packaging straight from the Mint where you choose to purchase. Most investors choose to leave it in the tamper-proof packaging to remove any suspicion of tampering and to protect their investment in the physical asset. If you opt to buy physical rhodium online, make sure you use a trusted source with an excellent reputation.