December 7, 2023

Coming Soon: Rhodium Bullion Coins

Rhodium is a member of the platinum metals group. It is silvery white in appearance and highly reflective. It has been used as a finish for jewelry and mirrors, electric connections in aircraft turbine engines, in catalytic converters of automobiles, and in alloys with platinum and palladium. Rhodium is known as one of the most scarce and expensive precious metals, but there have been few avenues for investing in the rhodium. This will soon change when the world’s first rhodium bullion coin becomes available.

Total rhodium supply for 2008 was a mere 695,000 ounces according to Johnson Matthey. To put this in perspective, for 2008 total platinum supply was 5.97 million ounces and total gold supply was 3,468 tonnes. Two regions account for the majority of all rhodium supply with 82% coming from South Africa and 12% coming from Russia.

Total demand for the rhodium in 2008 was 689,000 ounces. Demand by application was dominated by auto, which accounted for 84%.

Rhodium reached a peak price of $10,010 per ounce in July 2008 before experiencing a precipitous drop which brought the price below $1,000 per ounce. The price of rhodium is now back up to $1,300 per ounce. The incredible price decline for this scarce metal has tantalized bargain hunters, but there have been few options for investing in rhodium. The few options available include pooled accounts or the purchase of scientific element samples. The upcoming rhodium bullion coins will provide an easier alternative, especially for investors.

The Cohen Mint produced the first investment grade .999 fine rhodium coin on April 29, 2009. The coins are expected to be available for sale to the public within the next few weeks. Eitan Cohen, the owner and operator of the Cohen Mint, was kind enough to answer a few questions on rhodium and the new rhodium bullion coins.

How many rhodium bullion coins are being produced and when will they be available?

We have the capability of producing as many coins as there is a demand for. We will be selling the coins individually, and also in wholesale. There will not be any minimum order requirements.

What sizes will the coins be available in? Can you provide an idea of the projected price?

Initially, the Rhodium bullion will come in a 1 gram size. We decided both in terms of pricing as well as recognition, the 1 gram size would be perfect for this new bullion piece. The projected price at current raw material values hovers around $100.00. Now that price not only includes the coin, it includes the sealed plastic coin slab that will securely encase the coin, which is perfect for display as well as protection, a certificate of authenticity with each coin, and free priority shipping to your door.

How long have you been working on perfecting the process of minting coins in rhodium, and how does minting coins in rhodium differ from other metals?

We’ve been working on this for over a year now, its cost us a lot of money as well as time. The work involved in getting this project off the ground has been tremendous, easily the biggest thing our company has ever done. This is really an historic moment, where a truly unique precious metal product comes onto the market, and we’re just excited to be the ones to have pioneered it.

Making coins out of Rhodium has got to be as different from making other kinds of coins as can be. Normally, making coins is a very straightforward process. You roll an ingot out into a sheet, punch blank disks, and then stamp the disks with the design to make coins. This process works with just about any metal you can think of, copper, silver, gold, platinum, palladium, etc. You try and do that with Rhodium and you’ll end up with a bunch of broken flakes and powder. Rhodium has uncommon properties that make it extremely hard, brittle and down right stubborn, features that do not lend themselves to making coins easily.

The way we had to approach it was to come up with a completely new method, a method that was developed through trial and error, through extensive research, and through our own testing here at our facility. After nearly giving up a dozen times, we reached a “eureka” moment a couple of weeks ago, when we realised that we finally cracked the code, and would be able to set up full scale production. Boy, was that exciting.

After rhodium climbed above $10,000 per ounce, the price collapsed below $1,000. Demand continues to be dominated by a single industry. What is your take on the market for rhodium?

There will always be demand for Rhodium, and the price is temporarily depressed due to the terrible state of our economy and the even worse state of all automobile manufacturers. What’s important to keep in mind is that this artificial price dip is not forever, and there will come a point in the near future when people will start demanding cars again, manufacturers will start building them again, and the prices for many commodities will start to rise. Rhodium will be on the vanguard of this revival, and will climb back up to prices that will make us look back longingly at present values.

As the green movement takes a bigger hold on our world, Rhodium’s use in cleaning factory and power plant emissions will grow to be a substantial chunk of global Rhodium usage. Internal combustion engines are not going away any time soon, and of anything, emissions standards are only going to get stricter. This metal, along with platinum and palladium will feel a resurgence once the economy begins to pick back up and consumer confidence reawakens. Now is a great time to buy.

Gold and Silver Paper and Physical Markets Realign

Late last year and early this year, a continual observation of the gold and silver markets was the disconnect between the prices quoted on paper markets and the prices that you would actually need to pay to buy physical precious metals. In the past few weeks premiums for physical gold and silver have declined as the prices quoted on the paper market have risen, basically bringing the two markets back into alignment.

Back in October 2008, I had examined 100 ounce silver bars as an example of the excessive premiums being paid for physical precious metals. I collected some data from recently completed eBay auctions that showed the average price of the 100 ounce silver bar ranging from $1,329 to $1,557 while the market price of silver ranged from $8.88 to $10.89. This represented premiums ranging from $39.62% to 56.45%. This was particularly ridiculous since the 100 ounce silver bar has been traditionally viewed as a low premium method for silver investing.

Reviewing some data for eBay auctions completed yesterday now shows the prices paid for 100 ounce silver bars ranging from $1,450 to $1,500. At yesterday’s closing price of silver of $14.09, this represents a much more reasonable premium of about 3% to 6%.

Peculiarly, the decline in premium is a close match to the increase in price for spot silver. If you invested in silver by buying physical bars back in October, you might be showing zero profit even though the market price is up over 40%.

Future Gold and Silver Price Implications?

When the premiums for physical precious metals were high, it was viewed as a sign of heavy demand amidst a diminished supply that would eventually force market prices to move higher. Now that the disconnect between the paper and physical markets has seemingly resolved itself, is this a signal of slower demand that will lead to lower prices?

Despite the implication of slower demand, I think the realignment of the markets represents a long term positive for the price of gold and silver. Back when premiums were high, I am sure that many potential investors backed away from the market when they were faced with excessive premiums. Potential investors will now actually be able to buy physical gold and silver around the market prices. This is a much better environment for fostering mainstream demand to keep gold and silver moving higher.
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Gold, Silver, and Platinum Year To Date Performance

Gold, silver, and platinum have all been strong performance so far this year, but which has done the best? The table below presents the price of gold, silver, and platinum at the start of the year, today’s price, and the change. The performance of the S&P 500 is thrown in for good measure.

31 Dec 2008 17 Feb 2009 Change
Gold 869.75 968.00 98.25 11.30%
Silver 10.79 13.90 3.11 28.82%
Platinum 898.00 1,083.00 185.00 20.60%
S&P 500 903.25 789.17 (114.08) -12.63%

Silver has been the best performer so far this year with a gain of 29%, followed by platinum with a gain of 20.6%, and gold with a gain of 11.30%. The S&P 500 is down over 12%.

Silver and platinum were both down significantly in 2008 (see 2008 precious metals performance) so they are making up for some of their lost ground. Gold is continuing its moderate but steady price appreciation. Gold has had a positive return every year for the past eight years, even amidst the wild fluctuations in virtually every other asset class.

The line up above looked somewhat familiar, so I also decided to pull price data for the exact same time period, but one year earlier. Here is the result:

31 Dec 2007 17 Feb 2008 Change
Gold 833.75 912.50 78.75 9.45%
Silver 14.76 17.38 2.62 17.75%
Platinum 1,530.00 2,060.00 530.00 34.64%
S&P 500 1,468.36 1,349.99 (118.37) -8.06%

As you can see, last year started off eerily similar. Stocks were weak and precious metals were strong, led by platinum and silver. Gold, silver, and platinum would all rise to their peak prices in early March. After that prices started to deteriorate, and then deteriorate at an accelerated pace as the wheels fell off the stock market.

Will this be a break out year for previous metals, or a re-run of last year?