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Rhodium Under Valued and has Low Correlation with Gold and Silver Trends

Commodities / Rhodium Jan 20, 2011 - 04:04 PM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleRhodium Trading Thoughts is about timely and profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. Profits are the goals, not trades. Do not expect all recommendations to be profitable. No system can achieve that lofty goal. Our goal is simply to state whether conditions for a metal are favorable or not. Buy signals are issued when appropriate. These signals are generally speaking for day they are issued. If price remains below signal price, buying can be done. Do Not Buy signals are given when market is over bought, and buying is unwise. Blue triangles indicate an over bought condition. These would not be good times to buy, so they are labeled Do Not Buy. Software is not showing complete legend, for some reason.


Left out of much of the discussion of precious metals are technological advances. Excitement over rare earths, for example, has always assumed that alternatives, either in metals or due to technology, would not be developed. High prices do motivate researchers. For example, alternatives to expensive palladium might exist,

"Hiroshi Kitagawa and his team used nanotechnology to combine two metals, rhodium and silver, which normally do not mix, to create a palladium-like alloy. The team used nanotechnology to nebulise the two metals, mixed them with heated alcohol, and the two metals mixed, stabilizing at the atomic level."

"While both rhodium and silver are also precious metals, and carry quite the price tag, combined they may be cheaper than palladium. At the time of this writing the price of palladium is currently $802 per troy ounce, while rhodium is $2380 per troy ounce and silver is $31.02 per troy ounce. The team does not say what the ratio of silver to rhodium is, but in order for it to be worth while it's assumed that the ratio is high enough to bring the price lower than palladium.(J. Mulroy, PC World, January 2011, from news.techworld.com)"

Rhodium continues to be stopped out by the US$2,400 level. That flat response after touching that level in late December is what is giving the oscillator that over bought reading. That oscillator basically assumes more volatility in price than is being observed in the price of Rhodium.

US$2,400 level has now been of importance throughout the period of time shown in the chart. It is now serving as resistance. Given that the global economy continues to expand, demand for Rhodium should have a positive tone. A move above $2,400 should transform that resistance level to a new support level.

Chart below is of the ratio of US$Rhodium to US$Gold. When that ratio is declining, Gold is performing better. When it is flat, the performance of the two metals is relatively similar. It is a measure of relative strength.

Relative strength, of which this ratio is a measure, suggests something about future absolute performance. Relative performance normally improves before absolute performance. Reason for that is traders and investors look first for improvement in relative performance.

We note in that graph about when the relative performance of Rhodium bottomed by the red arrow. Since then, it has been rising. This action should start to attract investors. Part of the beauty of Rhodium is that it lacks significant investor involvement in the market at the present time.

OPINION:

Rhodium appears under valued and has low correlation with Gold and Silver. While the history in the second chart above is short, the green line shows how the volatility of a metal's portfolio is dampened by combining the two metals. One wants a portfolio's value to rise over time. However, variability of prices could mean your portfolio is down just when you need your money if you concentrate in one or the other. Diversification is always good unless one has a perfect crystal ball.

Investors should be diversifying their portfolio of precious metals through the addition of Rhodium.

RHODIUM TRADING THOUGHTS is published presently on an irregular basis, and is available only on selected web sites and at our web site: www.valueviewgoldreport.com

By Ned W Schmidt CFA, CEBS

Copyright © 2011 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to www.valueviewgoldreport.com

Ned W Schmidt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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