Technical Analysis: The Hottest Commodity of 2017?

One of the rarest precious metals is having its best showing in years.

Not even gold (up 10% from a low of $1,146.50), silver (up 15% from $15.94) or even copper (up 6% from a low of $2.448) can touch it. 

While all of those gains have been respectable, they can’t touch the gains produced by a silver-white metallic element that’s highly resistant to corrosion that’s under heavy demand in the auto sector.  Or in fewer words – Rhodium.

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And it’s absolutely vital to the rapidly growing auto market.

Exceedingly rare, the metal is already up 19% this year -- a far superior gain to most other major commodities. At the moment, up to 80% of the meal goes to catalyst applications in cars, where it’s used with platinum and palladium to control exhaust emissions.  And with auto sales on fire globally, more will be needed and fast. 

Interesting to note, the future of the global emission control market is just as explosive, estimated to reach $14.82 billion by 2021 thanks to stricter environmental policies across the globe.  That could be a big driver for metals such as rhodium moving forward.

The problem is that global rhodium supply cannot respond quickly to changes in demand.  So if supply runs short, prices rise drastically, as they are now. 

Currently at $920 an ounce, it’s under considerable demand in China, where auto ownership continues to explode at a fevered pace and could soon rival U.S. numbers.  Better yet, analysts note there are no reasons to expect the metal to pull back in price in the short or medium term, especially as supply moves into a deficit.

Technically, after falling from a 2014 high of $1,400, the metal appears to have bottomed out at $650, mid-2016 where it has since recovered to $920.  Should the recovery and demand story pick up further momentum, we believe the metal could retest $1,000 an ounce before long.

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