Pros and Cons of Investing in Rhodium | Financial Buzz

Pros and Cons of Investing in Rhodium

Rhodium is a safe haven asset that has assisted humans over the course of centuries. It’s been there as the government-controlled market ebbs and flows. But in 2020, is it still worth investing in Rhodium? This article will go over the pros and cons of doing so.

What is Rhodium?

Before investing in Rhodium, it’s important to understand just what it is.

Rhodium is a rare precious metal that mostly appears as a byproduct of platinum. The asset is mostly mined in South Africa, with only ten or so mines in existence worldwide. Because it’s so rare, the price is often much higher than other precious metals.

The asset is mostly used as a catalytic converter in cars, though the jewelry industry uses it to polish the appearance of some gold. Rhodium is also used as a sheen on expensive silverware to keep it looking new.

Pros of Investing in Rhodium

As mentioned, Rhodium is a rare precious metal that looks like silver but is chemically more similar to platinum; it’s also quite rare. This makes the asset significantly valuable. In fact, many are fans of the asset because they almost never see it under the four-figure price range. It has a level of volatility unmatched by other assets as well, which could be seen as a pro or a con.

Keep in mind that Rhodium is often used by automotive companies. Considering automobiles aren’t going anywhere for a long time, it’s always a safe investment to make. That, and because it’s so rare, car companies will buy it in bulk when the price is low. Investors who pay attention will invest around that time, knowing the price will skyrocket when car companies buy.

Those who don’t want to pay a massive fee for physical bullion have the option of investing in a bar of mixed metals that include Rhodium. However, these options are limited and only in certain areas.

Rhodium is also available in a coin format. However, this method is costly due to the asset’s high melting point. But the diversity is appreciated by investors who can afford it.

Cons of Investing in Rhodium

Keep in mind that while Rhodium is quite valuable, its price is just as volatile. The mid-2000s saw the price range anywhere from $400 to the $10,000 price point. It has since been bottoming at around $1000, though 2020 saw an 11-year high for the asset. This volatility can be seen as a pro or a con for many, and it’s important to pay close attention to the asset price because of it.

Once again, Rhodium is incredibly rare. That rarity could make it difficult to purchase a lot of it at once. It’s definitely an asset you’ll only want to buy if you can afford a decent amount of it.

The asset isn’t ideal for short-term gains, despite its volatility. However, if you can hold it in the long-term, Rhodium should appeal to you.

Rhodium has only recently become available in ETF or futures formats. It’s also difficult to physically acquire the asset you’ve invested in, meaning your investment options are limited. If either of these options is important to you, you might want to consider another precious metal.

How to Invest in Rhodium

Now that you’re aware of the pros and cons of Rhodium, it’s important to understand how to invest in it.

The easiest way is to buy Rhodium online. This can be done in a coin or bullion bar format. Bars are certainly cheaper, though they can be expensive to store correctly. Coins are easier to store but are hard to find and mold.

Depending on the Mint you purchase from, you can buy Rhodium in various fractional amounts as well. These are the most popular ways to buy, as you don’t have to commit to an entire bar of Rhodium.

Recently, Rhodium ETFs and Futures have been introduced. However, only the most dedicated of traders should participate in this due to the asset’s volatility.

While Rhodium is a rare, expensive asset, there are certainly pros to owning some. However, it’s not accessible to all, and it’s important to understand if you can afford to make it part of your portfolio.