Rare Earths Show Signs of Another Bull Market

Life-changing opportunities often come from the smallest markets or the tiniest stocks.

These opportunities are perfectly suited for the average investor, because they’re cheap enough to put your money in… they’re often overlooked by Wall Street… and they are so small that it could take just a little good news to send them soaring.

Take commodities, our bread and butter here at Casey Research. Most investors focus only on gold or silver, which offer plenty of strategies for building your wealth.

But there’s another set of metals that are almost completely overlooked. In 2018, the global market for this kind of commodity was worth just $2.8 billion.

For comparison, the global market for gold that same year was worth about $138 billion, almost 50 times higher.

But the small size of this overlooked metals market is exactly why I think it’s so exciting… because that means huge upside.

In fact, during the last bull market, some metals in this sector climbed by 1,000% or more.

And we’re seeing a similar opportunity today…

Rare Earth Elements

I’m talking about rare earth elements.

Rare earths are metals that have unique and valuable properties, like magnetism. They’re used in cutting-edge technologies that power everything from your smartphone to military aircraft.

In fact, rare earths are most often used in the manufacturing of military technology. For example, an F-35 fighter jet contains about 920 pounds of rare earths. A Virginia-class submarine contains more than 9,000 pounds of these elements.

So rare earths are critical because of their high-performance uses – and for our national security. But this market is still relatively obscure.

And this sector is almost entirely dominated by China-based producers. The country supplies 80% of the U.S.’s rare earths. Overall, China controls more than three-quarters of the total rare earth market.

Take it from Dave Forest, editor of International Speculator, and our go-to commodities expert at Casey Research:

Today, China dominates nearly every step of the rare earths supply chain. That includes mining, but also separating individual rare earth elements, and turning that raw material into specialty metal alloys to make high-tech parts.

America, on the other hand, let its rare earths infrastructure decay.

According to Dave, China’s stranglehold on rare earths supply, along with inflation, are what triggered the last bull market in 2010, when the metals soared as much as 1,000%. Dave again:

At the time, China – the world’s top producer of rare earths – threatened to cut off supply after a territorial dispute with Japan. These dual catalysts of inflation and geopolitics sent rare earths skyrocketing.

Dave knows what he’s talking about. One of his rare earths picks in International Speculator was up as high as 300% recently… and it’s been in the portfolio for less than a year. (You can find out more by going here.)

Meanwhile, China’s rare earths dominance is bothering U.S. officials. They don’t want to rely on China for crucial materials needed to arm and supply our military. So they’ve decided to take action.

It’s Time for Rare Earths to Be “Made in America”

As part of their push for rare earths independence, politicians have started suggesting that more rare earth elements should be sourced from within the U.S., or its allies, like Canada.

First, Republican Senator Ted Cruz announced that he would introduce legislation giving tax breaks and other incentives to companies that would produce rare earth elements domestically.

Then, on May 28, Representative Michael Waltz introduced a bill aimed at reducing America’s dependence on China for these critical elements.

The legislative push for rare earths independence is gathering momentum…

… but laws are one thing. Capital commitment is a much stronger vote of support.

Earlier in June, the U.S. Defense Department said that in the fiscal year 2021, it would seek a total of $2 billion for rare earths mineral purchases.

This is about 70% of the total rare earths market.

The Army isn’t releasing too many details about this funding, so nobody knows exactly how the $2 billion is going to be spent. If the government invests the money into U.S.-based and allied producers in the rare earths supply chain, the rare earths market outside of China will explode.

But even if a portion of the funds goes to Chinese companies, the global rare earths market will get a lift, too. (I’ll tell you how to profit from either scenario below.)

With the Army’s new push for domestic supply, some analysts predict China will lose as much as one-third of its market share by the mid-2020s.

And the market has already reacted to these announcements…

Since the depths of the COVID-19 crisis, rare earth elements outperformed the rest of the commodity sector by a factor of eight.

The broad commodity market has risen 7% since the market bottom on March 23, while rare earth elements have soared by 56%.

But it’s not too late to get exposure to this trend. Because this market is still small, I believe there’s plenty of upside left.

- Source, Silver Bear Cafe

Falling Supply and Surging Physical Investment, We Could See Some Crazy Silver Prices

Few investors realize that the fundamentals for silver continue to improve each and every day. Unfortunately, the bullish case for owning silver is lost in a market that has gone utterly insane trading high-flying over-leveraged tech stocks and other assorted financial garbage assets.

This is the way of the world presently… but a BIG CHANGE is coming.

As I have stated over-and-over again, the coming ENERGY CLIFF is going to change the world as we know it.

Thus, the value of most Stocks, Bonds, and Real Estate will disintegrate when global oil production heads south in a big way. And, we have likely already begun the process, due to the massive economic lockdowns in combatting the global contagion… which seems to be heading into a second wave.

While the global contagion impacted global silver mining the most over the past several months, I believe it will deteriorate even further in the second half of 2020.

According to a Reuters article, Mexico mining output to shrink 17% in 2020: industry group… this could impact silver supply considerably as Mexico is the largest silver producer in the world.

Here’s how I see the situation for global silver mine supply being negatively impacted this year and onwards.
The lockdowns of mines will impact two months of silver supply, mostly April & May. Most of the global mine supply affected by the worldwide contagion took place in Mexico and in South America, where most of the silver is produced.


Even after the world economies start to reopen, along with the mining industry, so much damage has been done to these economies; it will also hurt Global GDP in the second half of 2020 and likely into 2021. This will curtail base metal mining where 55% of silver comes from… as a by-product of copper, lead, and zinc production

Now, this leads me to the following chart. Global silver production peaked in 2015 and continues to decline while gold output hit a new record high last year:

Global silver production peaked in 2015 at 894 million oz (Moz) and declined to 836 Moz last year. While global silver production declined since 2015, world gold production increased from 104 Moz to 111 Moz. Thus, the global silver mine supply fell 6% since 2015, while world gold production increased by 7%.

To make matters worse for the silver supply, the impact of the global contagion will likely shrink production by another 30-50 Moz. So, there is an excellent chance that world silver mine supply falls below 800 Moz, to 785-795 Moz for 2020. Hell, it could be even lower if the situation continues to get worse in the second half of 2020.

The overwhelming majority of investors have no idea how undervalued silver is as an asset. With falling supply and surging physical investment demand in the future, we could see some crazy silver prices.

- Source, SRS Rocco

Holding at Least 10% in Gold Makes Sense as Inflation Begins to Pick Up

Look for gold prices to continue to move higher as the Federal Reserve will do everything to fight deflation risks, according to one economist. 

In an interview with Kitco News ahead of the Federal Reserve’s monetary policy announcement, Tim Shaler, chief economist at iTrustCapital, said that he couldn’t state enough the risks deflation poses for the U.S. and global economy.

- Source, Kitco News

Chaotic Price Swings Will Be Engineered To Shake Off Gold Investors

A European friend well known to us who prefers not to fall under even more surveillance in his own country sends the observations below, for which your secretary/treasurer will take the responsibility of sharing with you.

His main point — that huge volatility will be injected into the gold market to facilitate government intervention elsewhere in the world financial system — echoes the cable sent from the U.S. embassy in London to the State Department in Washington on the eve of the creation of the gold futures market in New York in 1974.

The cable noted the London embassy’s consultation with bullion banks about the futures market and provided this evaluation:

“The major impact of private U.S. ownership, according to the dealers’ expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison.

“Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens.”

The cable can be read here:

http://www.gata.org/node/17081

Our friend’s observations follow.

* * *

I’ve no real idea of who is doing what in the gold market, but the shenanigans in the last two weeks have all the hallmarks of a managed retreat by the forces seeking to control the metal’s price.

Clearly Friday’s U.S. jobs report was an exercise in trying to paint a picture of the possibility of a fast economic recovery, but I’m not sure it had huge credibility after its initial impact on the markets. The U.S. Federal Reserve and Treasury Department have a really big problem of needing to keep interest rates low while procuring massive new funds. A few weeks ago they got a 20-year bond away at a yield around just 1.22 percent, and the gold price was under pressure as they were doing it. That’s no coincidence, in my view.

I think we now can expect gold to be attacked whenever a major government fundraising is being arranged or some big economic news is being presented. President Trump will support all this as he appears to be heading for defeat for re-election in November. Given his record, I imagine that the positive official spin on economic news will become even more remarkable.

Attacks on gold will keep investor interest in the monetary metal and gold-mining companies relatively subdued. It’s much harder to maintain a position when prices are so volatile.

Gold investors expect that suppressing interest rates can be successful only if vast amounts of dollars are created and that it is impossible to do this without gold going much higher, especially since official gold holdings have been depleted by years of price suppression. I would never rule out a gold revaluation or debt jubilee as some have suggested.

But to quote Clint Eastwood in “The Good, the Bad, and the Ugly,” where he talks about the stash of buried gold just before the final shootout, “We are going to have to earn it.”

Gold investors should expect chaotic swings in prices in the next few years unless or until gold returns to anchoring the monetary system. But the underlying trend should be up, up, and away.

These are very strange times.

- Source, GATA

Total U.S. Petroleum Consumption Still Down 25%, Inventories At Record High

The stock markets surged today on news that the U.S. unemployment rate “SURPRISINGLY” fell to 13.3% in May, down from 14.7% in April. Somehow, with most of the country still on lockdown in May, there were 2.5 million Americans added to the payrolls along with 345,000 new businesses that were formed.

Then, of course, we had President Trump praising, The “V-shaped” recovery that was now taking place in the U.S. Economy. I find this quite hilarious when the U.S. Public debt increased by another cool $830 billion in May alone. Furthermore, if we add that amount to the $1,234 billion added in April, it comes out to be a TAD BIT more than $2 trillion in just the past two months. So, if this is a “V-shaped” recovery, it took one hell of a lot of debt to keep it from heading straight into a depression.

Regardless, while Americans are heading back on the road in their SUVs and Chevy Tahoes, total U.S. petroleum products supplied to the market are still 25% lower than there were in March:

I took the EIA, U.S. Energy Information Agency’s weekly figures, and provide a monthly average in the chart above. The monthly average for December to March was about 20.2 million barrels per day (mbd). However, this fell to an average of 14.5 mbd in April and then increased to 15.9 mbd in May. But, according to the EIA’s most recent update for the week ending May 29th, total U.S. petroleum products supplied fell to only 15.1 mbd.

The largest decline of petroleum products supplied came from the Jet Fuel and Diesel Fuel categories. Motor gasoline product supplied increased by about 300,000 barrels per day, but the total decline from Jet Fuel and Diesel was a little more than 1,000,000 barrels per day. It will be interesting to see the changes in U.S. petroleum products supplied over the next several months as we continue to up that MASSIVE “V-Shaped” Recovery… SARCASM… LOL.

I also looked at how much U.S. total oil production had declined from its peak. According to the EIA, total U.S. crude oil production has fallen from a peak of 13.1 mbd (million barrels per day) to 11.2 mbd, a loss of 1.9 mbd. However, if total U.S. petroleum products supplied are still down roughly 5 mbd, where is the rest of the oil going??

Remember, the U.S. oil supply has only declined by 1.9 mbd from the peak. The difference between the loss of production and products supplied is roughly 3.1 mbd. So again… where is this oil going??

Well… it’s going into the total U.S. oil and petroleum stocks. First, the total U.S. oil and petroleum stocks increased by 19.1 million barrels over the past week. If we divide by SEVEN DAYS, we get 2.7 million barrels per day. So, the U.S. Petroleum Industry is still adding nearly 3 million barrels per day to the country’s total oil-petroleum stocks.

The following chart shows how quickly the stocks have been increasing:

The figures in these charts are in THOUSAND BARRELS. So, the U.S. total oil and petroleum stocks are a bit more than 2 billion barrels. And keeping with the HOPIUM STOCK MARKET mantra, these oil and petroleum stocks reached a new record level this week of 2.078 billion barrels compared to the prior peak of 2.067 billion barrels back in August of 2016:

So, we will see what happens to U.S. oil demand and petroleum inventories over the next few months as we “Supposedly” continue back up the “V-shaped” recovery. Let’s just say… I have my doubts.

- Source, SRS Rocco

ECB Went Too Far and Gold Possibly Entering Seasonal Pricing

Will the latest unexpected blow to the ECB impact the Dollar Index over the next few months?

We'll explore the price movements of gold, silver, platinum, palladium, the DOW, and the US Dollar Index in today's show. Is gold now entering into its seasonal pricing trends as the summer begins?

- Source, Golden Rule Radio

Return to A Gold Standard Could Value Gold at $7000 or More

Central banks have been printing so much money lately that one firm suggests a possible return to the gold standard. In fact, based on the gold standard, the firm argues the implied gold price is higher than $7,000 an ounce. However, right now, it argues that gold prices are too high.

Gold is too expensive right now

In a note over the weekend, Invesco analysts considered whether gold is cheap or expensive. They said history suggests the yellow metal is expensive, but a return to the gold standard would mean that it's very cheap. Their current estimate of fair value puts the price at $1,613, which would mean that as things stand now, the gold price is too high. The gold price is currently above $1,700 an ounce and has been above that level for a while.

To argue that the gold price is too high right now, Invesco analysts looked at how many barriers of WTI oil can be bought using an ounce of gold. At 51 barrels of WTI, the yellow metal has never been so expensive. They note that the ratio has been increased by the weakness in oil prices and became even more extreme when WTI prices went negative, causing the calculation to stop making sense.

Based on the traditional method for studying gold, they said the price peaked in September 2011 at $1,898. In real terms using U.S. CPI numbers, there were only two times when the gold price has been higher than it is today based on annual data using year-end levels. In 1979, the yellow metal was $1,856, and in 1980, it was at $1,831. In 2011, it was $1,791, and in 2012, it was $1,853.

A return to the gold standard?

Invesco analysts argued that the exploding government deficits and growing debt are reasons to be concerned about the stability of the financial system. Government actions stand to debase the value of their currencies. They noted that the Federal Reserve, European Central Bank, Bank of England, Bank of Japan and Swiss National Bank have increased their balance sheets sevenfold in the 15 years ending at the end of next year.

With these types of concerns, they question how high the gold price could rise "in a catastrophic scenario."

"One way to think about this is to imagine an outcome so bad that policy makers opt for a return to a form of gold standard," they explained.

They noted that as of the end of April, the U.S. Treasury held 261.5 million ounces of gold. At $1,732 an ounce, the market value is $453 billion. They then question what would happen if that amount of gold had to back all U.S. currency. The analysts said if it replaced the monetary base, which was $4.85 trillion in April, it would imply a gold price of about $18,500 an ounce.

They add that while that's a dramatic statement, it may be an overstatement because much of the monetary base consists of reserves held by banks in the Federal Reserve System. Those reserves have increased dramatically since the Fed started its latest round of quantitative easing.

If gold only had to back the $1.89 trillion in notes and coins that are in circulation as of April, then the implied price of gold is around $7,225.

A global view of the gold standard

If looking beyond the U.S., Invesco analysts note that the World Gold Council estimates that official entities held 33,919 tons of gold at the end of last year. The current market value is $1.9 trillion. If that amount of official holdings had to back the amount of notes and coins in circulation, which amounts to about $8 trillion, gold would be worth about $7,336 an ounce.

That's based on data from the Bank for International Settlements, which indicates that there was $6.7 trillion in cash circulating at the end of 2018 in economies accounting for 85% of world GDP, based on GDP data from the World Bank. Invesco analysts add that the official gold holdings represented just 17% of "above ground" gold holdings, based on World Gold Council data.

Echoing something Crispin Odey said in an investor letter recently, they said they believe private citizens and entities wouldn't be allowed to freely hold gold if the gold standard were reintroduced. They note that there were restrictions on holding gold in the U.S. between 1933 and 1974, and federal law allows for gold bullion to be confiscated. Including all the "above ground" gold in the calculation, the value of gold declines to $1,259 or $2,378 if jewelry is excluded from the confiscation.

Behavior without the gold standard

Invesco analysts note that the value of gold can be essentially whatever they want it to be, based on how they do the calculation. Thus, they looked at it from the point of view of investor behavior around buying the yellow metal.

They looked back at the introduction of their gold model in 2016, which used a regression model to explain changes in gold prices by changes in the real 10-year U.S. Treasury yield, the 10-year U.S. inflation breakeven and a trade-weighted dollar index.

Invesco analysts noted a change in behavior around 2007. Before that year, gold prices climbed as inflation expectations increased. After 2007, gold prices fell when inflation expectations increased. They explained that the coefficients on the other two variables were always negative. They explain this by saying that gold buyers became more fearful of deflation than inflation after 2007.

Then that model started to have problems around the time President Trump was elected. Since November 2016, the gold price was well above the value predicted by the model. Thus, they re-ran the model and found that the best statistical fit comes from a dummy variable that was "switched on" in November 2016.

The analysts add that all the coefficients are still negative, which means that the gold price increases when real yields, inflation expectations, or the dollar decline. They said the coefficient on the dummy variable is positive and suggests gold has received about a $230 boost during Trump's presidency. They also said gold buyers seem more concerned about deflation than inflation.

- Source, Valuewalk via Silver Bear Cafe

The Coming Food Shortage, But You Won't Be Caught Off Guard if You Do This

Co-founder of Polyface Farms, Joel Salatin, author, educator, speaker, and advocate for local, sustainable, high-integrity food production, returns to Liberty and Finance / Reluctant Preppers to declare both the bad and surprisingly promising news emerging from the COVID-19 pandemic’s impact on the US food supply. 

Salatin squarely outlines the serious state of affairs in factory-scale food processing, and its affects on workers, farmers, and those of us who need a resupply of food. 

He goes on to expand our thought process and awareness of unexpected opportunities and new trends borne of this crisis, and offers some immediate steps we can each take to increase the resilience of our domestic food supply, even without having a homestead acreage, extra freezers, etc.

- Source, Reluctant Preppers

All Structural Momentum Pointing to the Sky for Gold, Silver and Junior Miners

Tom welcomes a new guest, Michael Oliver, to the program. Michael discusses his early career back in the mid-70s when gold was legalized. At the time, he didn't know much about markets and technical analysis. 

He looked for opportunity and ended up apprenticing under David Johnston, who was Chairman of the Comex. Instead of focusing on price, he looks at long-term trends, which is important because price being based in fiat can be misleading. He says, "Today, we are in the hyper-space of money printing." 

Using price can be compared to building a house with a yard-stick that changes in length. Their focus is on the longer-term and not the day to day, they look for structure rather than short moves in momentum. 

Long-term momentum can enable an investor to see the pattern before it shows up in the price chart. He provides us with some of their charts for gold and silver that demonstrate these advantages. 

Currently, momentum charts are looking very bullish for gold and the larger view shows that we are nowhere near being overbought. He doesn't believe the markets are going up for much longer, as often a bear trend can take a few months to settle in, which is likely what we will see. 

He compares today's markets with the Nasdaq crash that started in 2000. Michael sees clear signs that Fed Chair Powell is in complete panic.

- Source, Palisade Radio

Who Owns The Fed? Are They To Blame For 40 Million Unemployed?

Who's in charge? Is The Fed responsible for 40 million unemployed? The concept of a "Deep State" may be a new one for Americans to come to grips with, but unaccountable power is as old as the hills. Liberty & sound money are the only neutralizing agents to Deep State power.

- Source, Ron Paul

Dollar Vigilante: Get Far Away From The USA... It's Collapse Will Be Messy

Ultimate Confusion: What’s really Holding Gold and Silver Prices Back?

After nearly two months of trading range-bound, gold is currently under a consolidation period, said Todd Horwitz, chief strategist of BubbaTrading.com. 

“You’ve got the ultimate confusion in the market. There’s people trying to understand, is gold going to turn into a real currency because of what the Fed is doing,” Horwitz told Kitco News. “At the end it comes down to price and the price says that we’re in a state of confusion.”

- Source, Kitco News

Inflation, Deflation, or Stagflation and the Implications for Gold

Tom welcomes "outlier" investor Chris Temple back to the program. Chris discusses his often contrary perspectives on the markets and the Federal Reserve. In the late 70s and early 80s, the dollar was inversely correlated with gold, and the markets reflected the real economy. 

Today, everything is inverted, but a lot of investors and experts still have the old out-of-date mindset. It's essential to understand what happened with gold and the dollar forty years ago during the Paul Volcker era. 

The traditional business cycle has been replaced by a Federal Reserve managed credit cycle. Most currencies today have been handled poorly, and Chris discusses the real causes of the 2008 recession. Today, the trigger is the virus scare, and through each market cycle, the organic economy gets sicker. 

When you have too much credit, you get imbalances and that inflation inevitably leads to deflation. Due to the massive policy response, Chris expects a stagflationary environment going forward.

- Source, Palisade Radio

Mike Maloney: Will You Be Able To Get Cash From Banks In A Crisis?

If there’s a crisis will you be able to get any cash out of the bank? Will the banks even have any cash? Because, as of last March, it is no longer a requirement - the banks aren’t required to have a single dollar bill.

- Source, Gold Silver

Massive Demand: United States Mint Gold Coin Sales Already Double What it Was in 2019

Sales of the U.S. Mint Gold Eagle and Buffalo coins are already double what they were for full-year 2019. And, with the Fed and central banks continuing to print money hand-over-fist, I doubt the demand for gold coins will diminish anytime soon.

Interestingly, sales for precious metals bullion retail products, according to Dan at Cloud Hard Assets, are running about 60% for gold and 40% for silver (total value, not ounces). Investors would be buying more silver, but due to the backlog and shortage of retail silver bullion products, individuals are being forced to buy more gold.

According to the U.S. Mint’s most recent update, sales of 2020 Gold Eagles totaled 332,000 oz compared to only 152,000 oz for 2019. Furthermore, Gold Buffalo coin sales have reached 117,500 oz versus only 61,500 for 2019. Again, we are only five months into 2020, so it will be interesting to see what demand for these U.S. Gold coins will be for the remainder of the year.

Investors looking to acquire Gold Eagles and Buffalos are still paying high premiums. In comparing the premiums for 2020 Gold Eagles and Buffalos, the best value that I could find from the leading online dealers is about 8%. However, the Gold Buffalo coin premiums were even higher.

Here is an update on the BEST BUY PRICES for 2020 Gold Eagles and Buffalos from the leading online dealers’ vs. CLOUD HARD ASSETS (Prices below based on $1,745+ gold spot price early Thursday):

As you can see, it’s important to compare the prices of gold bullion products (and services). Moreover, I am putting together a spreadsheet comparing the top online dealers’ Silver Eagle premiums vs. CLOUD HARD ASSETS. Today, the top online dealers 2020 Silver Eagle premiums are running about 59% of the current spot price vs. 39% for CLOUD HARD ASSETS. Again, it’s wise to compare prices and services at the different precious metals dealers.

Again, the prices above were based on a $1,745+ gold spot price during early Thursday trading.

- Source, SRS Rocco