Commodities Watch: Cotton Prices and Retail Sales; Oil Highs; Stockpiling Rare Earths; Silver Vs. Gold

Paul Ausick

April 7, 2011

...US Congressman Mike Coffman (R-CO) has introduced legislation that would create a US stockpile of the rare earth minerals crucial to many advanced military weapons systems. The stockpile, which Coffman calls an “inventory,” would be amassed by a new federal agency that would create a domestic US market for rare earth minerals and make it easier for domestic sourcing of the minerals.

It’s not exactly clear how this “inventory” would be managed. According to the Congressman, the new agency would establish long-term supply contracts and then sell the supplies to federal contractors. What is crystal clear, however, is that building a federal stockpile, or inventory, would increase demand for the rare earths. Likewise, of course, absence of a stockpile introduces uncertainty about supply and could drive up prices on prospects of a shortage of supply.

Shares of rare earths miner Molycorp Inc. (NYSE: MCP) are up nearly 7% today, to $66.35, with the 52-week range of $12.10-$67.77. Molycorp is based in Coffman’s home-state of Colorado. Shares of Rare Elements Resources Ltd. (AMEX: REE) are up more than 12%, to $14.74, within a 52-week range of $1.15-$17.92, and shares of Miner Avalon Rare Metals, Inc. (AMEX: AVL) are up more than 5%, to $9.15, in a 52-week range of $1.09-$9.50. The Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) is up more than 1.6%, to post a new high of $27.55