Rhodium Trading Thoughts 14 October 2011

The secret to investing during the past few months has now been revealed. If prices are going to go down, do not buy anything. Other than the dead cat bounce in the financial markets of the past few weeks, seems prices for almost everything are down. Rhodium was involved, and the pain has been high since last we visited.

Financial turmoil in Europe, perhaps a slowing Chinese economy, and the near comatose economy of the U.S. have not been positive for metals. Much of the problem is that dealers have been having trouble financing inventories. When financing is difficult to find, reducing inventories is only option for dealers. However, we do note that the 2.5 billion consumers in China and India will be buying cars in the decade ahead. In many of those cars will be Rh as part of the pollution control equipment.

Relative strength in bottom chart may be pointing to some improvement. Relative strength verus Gold has been fairly stable for weeks. Move through that trend line would be a positive sign as relative strength change precedes absolute price change.

A positive for Rhodium would be a widening of the ability to trade it. Illiquidity is an issue. We find some encouraging news in “Comdaq Metals launches euro online rhodium trading” from platinum.matthey.com, 11 October 2011,

“Comdaq Metals has launched the online trading of rhodium in euros to complement its existing platform in US dollars, reports Commodities Now. The over-the-counter broker unveiled the new trading of rhodium after success covering precious and platinum group metals.”

“Neil Grover, director of Comdaq Metals Group, explained that offering online rhodium trading in euros will ‘create more liquidity through online order flow’.”

“The new product comes two days after new daily record trading volumes were created in US dollar-based rhodium online. ‘Volumes continue to increase annually along with the volumes transacted via our Tradable benchmarks,’ Mr Grover said.”

Chart above is of the combined size of the Rhodium ETCs, European ETFs, which trade in London. One is denominated in Euros and the other in dollars.

By the way, well seasoned trader Tim wrote this week that Ge was the more under valued of the rarer metals. Will have to take his world for that. We thought it was a stock symbol.

OPINION:

With the ongoing bear market in Silver and one likely developing in Gold, investors should diversify their metal portfolios. Asian demand for metals such as Rhodium should ultimately raise the demand floor. Rare metals in the future will be rarer. That is the reality of the situation.

Valuations on next page.

Your Eternal Optimist;

 Ned W. Schmidt,CFA,CEBS

 Click to email me: [email protected]

To subscribe to The Value View Gold Report use this link: valueviewgoldreport.com