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Dear Fellow Investor,
Will lightning strike twice?
I’m pretty sure it will — but perhaps not just yet. Allow me to explain...
Many of us remember the boom in rare earth metals about a decade ago very fondly. A number of the rare-earth exploration companies we recommended in Gold Newsletter multiplied in value, creating fortunes for our readers.
One prime example was Rare Element Resources. I was the first analyst to recommend the company, at just C$0.34/share. It eventually soared more than 50 times over in price.
We all could use another winner like that.
Now there’s evidence that we might see another move in rare earths — perhaps not a multi-year rally, but at least a short-term spike.
You see, the U.S. still gets the vast majority of the rare earth metals it needs for innumerable high-tech applications from China. And in case you haven’t heard, we aren’t getting along too well with the Middle Kingdom these days.
Considering that China has supplied about 90% of the world’s rare earths since the 1990s, and considering how vital these elements are to everything from mobile phones to the defense industry, it would seem that this sector is an important chess piece that China could play in its trade conflict with the U.S.
And if they didn’t think so, the U.S. is pointing it out for them. President Trump, for some reason, has already threatened to place tariffs on China’s rare earth imports to the U.S.
Talk about cutting off your nose to spite your face!
But the Chinese are already making some moves themselves.
Last week, Chinese customs authorities in a province bordering Myanmar shut down vital rare earth mineral imports from that nation, apparently in an effort to curtail smuggling.
As a result, the price of dysprosium, to use one example, spiked to a four-year high.
Then, a few days ago, Chinese President Xi Jinping made a public show of a visit to a domestic rare earth mining company. Investors speculated that this wasn’t just a coincidence and was intended to send a message to the U.S.
Rare earth prices — and the share prices of rare-earth explorers and miners — began to take off in response.
It’s just another example of how this and every investment sector are being driven by headlines, particularly headlines on the ongoing trade war with China.
So will we see another big boom in rare earth prices? Can we expect another 50-1 winner?
Well, that might be expecting a bit too much. In fact, although I’m bullish on rare earth prices over the long run, the current spike is purely the result of a trade spat that will eventually be rectified.
In other words, it’s likely to come and go well before we can make much, if anything, from it. And there’s a significant risk that anyone trying to trade this move will be left holding the bag at the end of it.
As always, we’ll continue to monitor the situation and look for opportunities. If you want to get our on-going recommendations, I urge you to subscribe to Gold Newsletter by clicking here.
All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference
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