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Rhodium to appreciate amid rising demand from automakers, says Deutsche Bank

TradingPub Admin | August 13, 2013

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Rhodium, a precious metal that has recently plunged to its lowest price in nine years, is predicted to appreciate during the rest of 2013, according to major financial services firm Deutsche Bank AG.

The major financial services firm recently estimated that for 2013, the material will have an average price of $1,170 an ounce, according to Bloomberg. This figure is higher than the $1,124 per ounce that the commodity averaged so far this year.

Bullish rhodium predictions
During the final quarter of the year, the precious metal will be worth $1,200 an ounce, the media outlet reported. This prediction was made by Deutsche Bank after rhodium fell to $925 per ounce in July, which was its lowest in nine years, according to Reuters.

Amid this sharp depreciation, there are some developments that could provide substantial support to the precious metal. Johnson Matthey general manager Jeremy Coombes noted that the price of the commodity could be bolstered by the Euro VI regulation, which involves the emissions produced by vehicles, the media outlet reported.

Pending regulations
Catalytic converters will have to contain more precious metals due to the new regulations, as a result of initiatives happening both in Europe and also throughout the rest of the world, according to Bloomberg. Such changes could certainly drive demand for rhodium higher, as Johnson Matthey Plc. stated that these converters currently use 80 percent of the commodity.

"Given that rhodium is much better than palladium at treating nitrous oxide gases and given that the ratio has gone close to parity, it makes sense if you're an auto manufacturer and want to capitalize to add more rhodium to the mix," Grant Sporre, an analyst at Deutsche Bank in London, told the news source during an interview. "Rhodium does look interesting at these levels."

In addition to the usefulness of rhodium in combating these harmful gases, it is relatively rare in comparison to the other metals that are used in catalytic converters, according to Bloomberg. Data provided by Johannesburg-based SBG Securities indicated that 199 metric tons of palladium will be produced in 2013, which is far higher than the 22.5 metric tons of rhodium that will be mined.

Doubts about rhodium
While Deutsche Bank has provided bullish predictions about the precious metal, some analysts have said that the future of rhodium is uncertain, as the sharp fluctuations that it has experienced in the past could result in it plunging in the future, Reuters reported.

"The question is - is rhodium cheap today, or not?," Mitsui Precious Metals analyst David Jollie told the news source. "Fifteen years ago, prices were at around $250 an ounce. In a metal that's moved that far over a 15-year period, judging whether today is a good price or not is very challenging."

He added that many investors are holding back on purchasing the metal since there are concerns that it could potentially incur losses before it makes more gains, according to the media outlet. The analyst stated that while many market experts believe that rhodium has value over a substantial period, nobody knows how long that time frame will be.

Investors who are wary of buying the metal due to its past price fluctuations might be wise to take such a position, as rhodium appreciated to as much as $10,100 an ounce between 2005 and 2008, Bloomberg reported. This figure represents a rather sharp contrast to the decline that the metal experienced recently, which sent it below $1,000 per ounce.

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