Rhodium a positive addition to a precious metals portfolio

Technological advances are often left out of much of the discussion when talking about precious metals. Excitement over rare earths, for example, has always assumed that alternatives, either in metals or due to technology, would not be developed. High prices do motivate researchers. For example, alternatives to expensive palladium might exist.
“Hiroshi Kitagawa and his team used nanotechnology to combine two metals, rhodium and silver, which normally do not mix, to create a palladium-like alloy. The team used nanotechnology to nebulise the two metals, mixed them with heated alcohol, and the two metals mixed, stabilizing at the atomic level. While both rhodium and silver are also precious metals, and carry quite the price tag, combined they may be cheaper than palladium. At the time of this writing the price of palladium is currently $802 per troy ounce, while rhodium is $2380 per troy ounce and silver is $31.02 per troy ounce. The team does not say what the ratio of silver to rhodium is, but in order for it to be worth while it’s assumed that the ratio is high enough to bring the price lower than palladium.”(J. Mulroy, PC World, January 2011, from news.techworld.com)”

Rhodium continues to be stopped out by the US$2,400 level. That flat response after touching  that level in late December is what is giving the oscillator that over bought reading. That oscillator basically assumes more volatility in price than is being observed in the price  of rhodium.

US$2,400 level has now been of importance throughout the period of time shown in the chart. It is now serving as resistance. Given that the global economy continues to expand, demand for rhodium should have a positive tone. A move above $2,400 should transform that resistance level to a new support level. The chart to the right is the ratio between US$/rhodium to US$/gold.

When that ratio is declining, gold is performing better. When it is flat, the performance of the two metals is relatively similar.

Relative strength, which this ratio measures, suggests something about future absolute performance. Relative performance normally improves before absolute performance. The reason for that is traders and investors look first for improvement in relative performance. It is a measure of relative strength.

The red arrow in the graph shows  when the relative performance of rhodium bottomed out. Since then, it has been rising. This action should start to attract investors. Part of the beauty of rhodium is that it lacks significant investor involvement in the market at the present time.

OPINION:

Rhodium appears under-valued and has a low correlation to gold and silver. While the history in the chart to the right is short, the  green line shows how the volatility of a metal’s portfolio is dampened by combining the two metals. One wants a portfolio’s value to rise over time. However, variability of prices could mean your portfolio is down just when you need your money, if you happen to concentrate in one or the other. Diversification is always good unless one has a crystal ball. Investors should be diversifying their precious metals  portfolio by adding  rhodium.

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