Comment The high-tech bull market of the 1990s benefited more than the dot-com and ISP stocks. Computer hardware and software, telecommunications, tech consulting and biotech stocks all enjoyed magnificent booms within the overall secular bull market.
But it all didn’t happen at the same time.
Rather, each of these sectors found their strengths, and weakness’, at different times than others. Some led…some lagged… and some built momentum and strength for others to follow. Nevertheless they all contributed to what is known as the single biggest tech bull market in history.
Today’s metals bull market has a similar flavor.
Recent upswings in various metal prices have come at different times due to a range of several different factors. But like each sector that benefited in the 1990s tech boom, each metal is being benefited in today’s commodity bull market.
Gold has been the superstar of the group. The yellow metal has easily gained worldwide interest from the major investment houses to your run-of-the-mill investors as prices flirt with nominal highs. Gold’s consistent rise paved the way for its precious siblings silver and platinum, both of which are also teetering on multi-year highs.
More recently, many base metals have broke nominal highs, attracting heavy media awareness. Lately, the main stream financial media has seemingly fell head-over-heels in love with base metals, especially copper and zinc.
Precious and base metals are going through a highly expected, and much needed correction right now. However, despite this correction, there are a small group of lesser-known metals that are still increasing and approaching record highs.
These are the collection of metals that make up the platinum group metals (PGM).
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discuss rhodium.
Rhodium is a hard silver-white metal that is highly resistant to corrosion and is extremely reflective.
Rhodium is used as an alloying agent for hardening platinum and palladium. These alloys are used in furnace windings, bushings for glass fiber production, thermocouple elements, electrodes for aircraft spark plugs, and laboratory crucibles.
High rhodium prices during the late 80s led to increased rhodium production from South Africa, the world’s largest supplier.
In fact, South Africa accounts for almost 60% of the world’s rhodium supply.But the rise in prices spurred an increase in production, which caused prices to drastically decline during the 1990s.
Today prices are moving at light speed to levels not seen for 15 years.
Now here’s what really impresses me.
Rhodium costs approximately six times as much as gold!
Why?
Well, annual world production of rhodium is only about 20 tons (about 40,000 pounds) making it very rare.
This morning rhodium was trading around $6,250 an ounce. This is an increase of nearly 25% in a little over a week and 105% for this year.
Regardless of these near vertical climbs, the rhodium market still looks bullish.
Right now the rhodium market is fundamentally driven. The fact is supplies are tight, and demand is consistent.
South African mines haven’t been able to push out as much rhodium as they want or planned. In fact, last year rhodium demand grew by more than twice the rate of increase in production. That’s a detail that no other commodity can claim.
In 2005 demand rose 10% to 812,000 ounces, up from 2004’s 729,000 ounces. This strong demand did spur some production. But not much. Global supplies only increased by a mere 5%. This has caused a major supply deficit.
With demand for rhodium still high and producers unable to make with the goods, rhodium is poised to soon break its all-time nominal high of $7,000 an ounce.
How can you profit?
Simple. Even though rhodium is relatively illiquid and not traded on any futures exchange, investors can still leverage themselves to higher prices through buying the producers.
The problem is, however, rhodium is a not a primary metal in the chain for any PGM producer.
But a PGM producer with a heavy interest in rhodium is sure to take advantage of this bull market.
Good Investing,
Gold World
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