Precious metals stocks have been on a tear as prices for the metals rise over inflation, supply, and Chinese stockpiling concerns. While the mining industry prospers, customers are beginning to look for ways to deal with surging commodity costs.
In the medals group, gold rose nearly 25% in the past year, bringing along with it gold producer NovaGold Resources
And that's not even the hottest part of the metals market.
As anyone who hasn't been living in a mine knows, the rare earth metals space is on fire. Many companies have grown concerned with China stockpiling metals. This and the rebounding economy have caused prices to soar and have opened the door for more expensive producers to begin operations. Molycorp
A player in the rare metals space that is producing metals (palladium and platinum) is North American Palladium
Businesses that require precious metals are getting hit by higher costs and have begun to search for ways to mitigate price increases. Some speculators believe that demand for the metals will only increase and that substitutes are unavailable, but that's not stopping some companies from taking action.
Toyota Motors has also been looking for work-arounds. Last month, the company announced it would search for methods to build hybrids and electric vehicles without rare earth elements. Other companies are taking a different tact and are passing costs directly onto consumers. Eastman Kodak, for one, requires a large amount of silver to produce its film. The company has begun indexing the price of film to silver prices, effectively passing off its increased costs and maintaining its margins. The company also continues to shift toward more digital offerings, substituting out the company's need for silver.
Precious metals stocks face many headwinds as supply increases. As more companies begin searching for alternatives, demand assumptions should be reconsidered. If you are interested in following these companies, we can help you keep tabs on them with My Watchlist, our free, personalized stock tracking service. Click below to add any of these metals stocks to your watchlist.