What rhodium tells us about the economy
Platinum and palladium have been enjoying a rally recently. But one related metal - rhodium - isn't faring so well. So what can we learn from the falling price of rhodium?
Platinum and its lesser-known cousin, palladium, have been on a roll lately (see chart below). Both metals are heavily used in catalytic converters for vehicles (auto catalysts account for 32% of platinum demand, and 52% of palladium). Their prices have kept pace with global stocks this year, moving higher roughly in sync with the MSCI World Index of global stocks. So not much evidence of a slowdown in industrial demand here, you might think.
But another platinum group metal, rhodium, which is also used in catalytic converters for vehicles, paints a different picture. Platinum and palladium are also used in jewellery and can be easily purchased by investors via exchange-traded funds (ETFs), so demand isn't based purely on the car industry. But a full 86% of rhodium demand comes from catalysts. That makes it a much more useful guide to industrial activity.
The bad news is that the rhodium price is down by more than 20% since this year's high in April, says analyst Park So Yeon on Bloomberg. Unlike copper, rhodium supplies aren't under pressure, so any price drop can be explained largely by demand. As Park notes, this "weakness in the price suggests that economic fundamentals still lack momentum". As a result, "the rally in global equities, largely driven by expectations for further quantitative easing measures, may take a pause".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
How to invest in nuclear power
We need nuclear power to go green, says Dominic Frisby. But there is a better option than huge power stations
By Dominic Frisby Published
-
Chase slashes its easy-access savings rate – is it time to switch?
The Chase easy-access savings account has proved popular with savers thanks to its competitive rate and bonus deals. But, as the rate has dropped, has it lost its charm?
By Katie Williams Published