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There are a number of factors that help to determine the price that rhodium, a popular precious metal, trades at in global financial markets. Rhodium is a commodity, a physical metal that is traded in various ways across continents and through various exchanges and trading venues. Investors who understand how diverse factors play into rhodium price will have a better chance of capitalizing on price gains or losses for this kind of metal commodity.
When rhodium is priced per ounce, like other precious metals, supply is a major part of the price change. Classically, the biggest amounts of rhodium have come from the countries of South Africa and Russia. Investors continue to look at any increases in rhodium inventories, or interruptions of rhodium supply, to try to identify rhodium price changes in the market.
Another big aspect of rhodium price is demand for this precious metal. Rhodium is used in some technologies, such as aircraft design, as well as some kinds of jewelry. It is also used in the catalytic converter of a vehicle, as are other precious metals like palladium. The “catalytic converter demand” on its own can produce price changes in rhodium, palladium, and other relatively rare metals.
Investors who want to understand changes in rhodium price will also look at how speculation affects a vast range of commodities. These days, rhodium and other precious metals provide the basis for a multitude of mutual funds, exchange traded funds, and other investment instruments that sometimes provide feedback on an overall precious metal price. That means that speculation is having a heavier hand in how commodities are valued, leading to a lot more volatility for elements like rhodium.
One way that traders attempt to capitalize on rhodium, or any other precious metal, is in identifying general market trends. Even though precious metals have relatively fixed values, that is, concrete values per ounce, general market trends can change how much buyers are willing to pay for this commodity. These days, investors are “timing the market” for commodities, much like they time the market for stocks, since new fund opportunities offer the ability to “get in and out of” precious metals quickly. All of this is critical to understanding how investors look at rhodium and other precious metals, not just as things used for consumer or commercial products, but as abstract moneymakers that can change dramatically in value.