Energy Metals Lead the Charge / Commodities / Metals & Mining

Gold and silver aren’t the only viableplays in the metals space – and they aren’t currently the leaders.

On Wednesday, both copperand platinum rallied up to multi-year highs. Rhodium, meanwhile, currentlycommands $21,000 per ounce – yes, per ounce – making it one of the mostvaluable elements on the planet.

What’s driving these“energy” metals? Besides ongoing currency depreciation and the risks of higherinflation, which will help boost all hard assets over time, rising demand forelectricity in general and electric vehicles in particular.

President Joe Bidenrecently decreed that the federal government must transition its entire fleetof cars, vans, and trucks to electric motors.

That’s just for starters.Next, the administration aims to mandate that all new vehicles sold in theUnited States are electric.

The Zero EmissionTransportation Association, a lobbying group backed by Tesla and othercorporate interests, is pushing for the abolition of gasoline-powered cars by2030.

Nevermind that such a movewould mean more burning of coal and natural gas to generate the electricityneeded for millions of “zero emission” vehicles. It would also require themining of millions more tons of base metals, including copper and nickel.

The need for copper is exponentiallygreater in electric vehicles as compared to conventional cars. A typicalgas-powered car requires about 30 pounds of copper. A battery-powered electricvehicle averages a massive180 pounds of copper– six times as much.

According to the InternationalCopper Study Group, “At the heart of the electric vehicle, copper is usedthroughout because of its high electrical conductivity, durability andmalleability. And even more is used in charging stations and in supportingelectrical grid infrastructure.”

The electrification pushwill mean a massive demand surge for silver as well. Silver is used invirtually all high-tech components of electric vehicles. It is also used insolar panels, the fastest growing source of industrial demand for silver.

In the meantime, theinternal combustion engine won’t simply disappear through executive order –especially in the developing world.

Thanks to more effectivecatalytic converters on newer cars, emissions can be reduced dramatically.

But these pollution-scrubbingdevices require specialty metals to do the job – namely, platinum, palladium,and/or rhodium.

According to JohnsonMatthey analysts, the platinum group metals (PGMs) face supply shortfalls.After being undersupplied by 390,000 ounces last year, platinum is forecast to experience another deficit in 2021.

Mining production of PGMs,which takes place primarily in South Africa, has been curtailed by COVID andlabor strife. Whether mines can increase output significantly in the monthsahead to meet demand remains to be seen. (For more on the investment case for platinum, see my recent analysis here.)

The copper, silver, andgold markets face similar supply troubles going forward.

On the demand side, themost compelling growth trends are emanating from electric vehicles and solarpower systems.

It’s not just governmentmandates that are behind alternative energy growth. Tremendous gains inefficiency have also made things like electric trucks and off-gridsolar-powered homes more practical.

Investors can count on high rates ofgrowth in these areas throughout the 2020s. However, they should be cautionedthat shares of companies such as Tesla (TSLA) are currently being priced basedon expectations for tremendous future growth. In other words, the biggest stockmarket moves may have already been seen.

The biggest moves in someof the energy metals that go into batteries, charging stations, solar panels,and other electrical components may have yet to occur.

Speculators may find basemetal and precious metal miners attractive. But the surest, most direct way togain from stronger metals markets is to own the metals themselves.

There are, of course, manyways to acquire physical precious metals – either though taking possession of coins,rounds, and/or bars or having bullion stored professionally through a securevaulting service such as Vault Metals.

It’s possible to own investment-gradephysical copper, too. Copper bullion bars are available, as are pre-1983 copperpennies by the pound.

Copper pennies currentlyhave a melt value of around 2.5 cents each – a testament to the currency’sdepreciation over the years.

While they will never bethe most valuable coins you hold, solid copper pennies can be practical to keeparound for inflation protection and possible use in barter transactions.

The drawbacks to copper arethat it’s not a precious metal and can be cumbersome to hold in largequantities. Unlike gold, copper tends to be tied closely to the economic cycle.So if you’re expecting a crash soon in the world economy, you’d probably wantto favor gold over any industrial metal.

Silver, on the other hand,has the characteristics of both an industrial and a monetary metal. It can movebecause manufacturers need it in high-tech electronic applications or becauseit’s a form of sound money, sought after as such amid a currency crisis.

Given the growing inflationrisks from unprecedented government and Federal Reserve “stimulus” combinedwith the unfolding mega-trend of electrification, silver may be ideallypositioned for the times.

Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2021 Stefan Gleason - All Rights Reserved

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