American Elements has launched something called AE Bullion. This post should be considered as a warning not to actually buy any of their products.
Los Angeles based American Elements announced today the launch of AE Bullion™. The new product group will mint certified high purity coins and bars from approximately sixty advanced, rare and less common metals for short and long term physical investment. Metals include rhodium, tellurium, indium, hafnium, scandium and the 14 rare earth elements; all metals which have experienced dramatic world price increases in 2007.
Coins and bars will be minted from assayed materials produced by American Elements\’ AE Metals™ high purity refining group. Coins will be available to hedge funds, currency reserves and exchange traded funds (ETFs) in order to establish tradable securities and to allow for exposure and controlled risk to commodity and industrial demand fluctuations. Also, private investors, collectors and hobbyists can now take direct physical title and possession to these metals with risk exposure equivalent to movements in the world spot price.
Portfolios of different elemental metal coins and bars may also be structured allowing for strategic risk allocation and indexing across a basket of metals. American Elements will offer bonded short and long term warehouse inventory services for AE Bullion™ coins to investors, funds and collectors who do not wish to take physical custody of the metal or lack secure storage or warehouse capabilities.
This is a terrible idea, seriously awful, from the investors point of view. The first and most important point is that these metals don\’t have liquid markets. Taking scandium for example: as regular readers will know I make my day job living dealing in the material. But in over a decade I\’ve never actually sold the metal itself to anyone. The oxide, yes, the oxide when made into a aluminium master alloy, yes, but not the metal. I would be astonished if the global market in 2007 was more than 1 kg of the metal in total. The same goes fo many of the rare earth metals (some do indeed have markets, others, ytterbium etc, not. I once had a piece of lutetium and the only thing I could manage to do with it was sell it to someone who prepared elements for collectors.). Further, even where there are markets fo them, no one ever buys them piecemeal. Long term supplpier contracts are the order of the day. Hafnium as coins and bars also strikes me as rather silly: a typical Hf metal purchase would be 500 kg to 5,000 kg. Piddling about with an ounce or two in a coin simply won\’t happen.
Rhodium is something that might be worth speculating in but there\’s already a mechanism to do that. Open an account at Johnson Matthey and get on with it.
This has overtones (and no, I\’m not making an accusation here of it being the same) of a program that went on a decade ago, with indium and germanium. An investment boiler house was selling these "vital electronic metals in short supply" by the ounce to impressionable retail investors in the US. They were paying $ hundreds an ounce to take physical possession of material worth, at that time, $10s per ounce. Usual hard core telephone sales techniques.
Prices did indeed rise but not enough to cover the marketing mark up: and anyway, with these metals it\’s an industrial market. Buyers are the big electronics companies and they pick up a tonne or two at a time.
The basic point is that these metals are really not for the private investor as there are no liquid markets. And even when there are, they\’re not in the sort of quantities that a private investor would be dealing in. With the exception of rhodium (where, as noted, there is already a mechanism) this just isn\’t a sensible place to go speculating.
Disclaimer: yes, I do deal, or have done, in several of these metals. Yes, I would benefit if a private market was created to speculate in them. Yes, I still think it\’s an extremely bad idea that you shouldn\’t go anywhere near.
There was in fact a scandium metals futures market in Moscow in the early-mid 1990s. It collapsed after about 50 trades as there was no terminal market. This idea will face very much the same problems.