From gold bars to rare earths: Pentagon’s billion-dollar bet on America’s resource security

The Pentagon isn’t normally within the enterprise of commodity hypothesis, however when nationwide security is at stake, count on the previous guidelines to bend. The Financial Times reviews that the U.S. Defense Department has kicked off a $1 billion spree to stockpile essential minerals like rare earths.

This contains every little thing from rare earths to strategic metals wanted for electrical automobiles, fighter jets, and semiconductors. The purpose? Build home resilience. Break dependency on a Chinese provide chain that’s confirmed something however reliable.

The transfer to procure up to $1 billion worth of essential minerals is a part of a world stockpiling effort geared toward countering Chinese dominance. It highlights a strategic pivot that echoes Cold War-era stockpile packages. Back then, it was oil. Today, assume lithium, cobalt, nickel, and rare earths. Basically, all of the stuff you’ll discover in Teslas, missile steering methods, sensible bombs, and high-frequency radars.

Supply chain jitters have been brewing for years, however they hit essential mass after China imposed contemporary export restrictions on rare earths and different strategic supplies. The transfer instantly induced an earthquake throughout worldwide markets, together with Bitcoin and crypto, with Donald Trump spewing on Truth Social:

“China is “changing into very hostile, and sending letters to Countries all through the World, that they need to impose Export Controls on each aspect of manufacturing having to do with Rare Earths, and just about the rest they will consider, even when it’s not manufactured in China.”

The Pentagon’s transfer isn’t speculative; it’s a defensive posture. This marks one of many largest mineral procurement efforts in a long time, and Washington isn’t alone. Brussels and allies throughout Europe are dashing to catch up, stockpiling for struggle danger and vitality transition alike.

China throws markets a lifeline

In a breaking growth on Sunday, Beijing seems to have softened its stance. China defended its current export controls as “reputable,” stressing that they’re in step with worldwide legislation and geared toward safeguarding international peace and stability (not instigating financial warfare).

Importantly, China clarified these controls usually are not absolute bans, including that export purposes assembly standards will nonetheless be permitted, and dialogue channels with main buying and selling companions stay open. Chinese officers mentioned the controls don’t quantity to export bans and that purposes that fulfill the factors shall be permitted.

This softer rhetoric ought to begin to calm investor nerves. With China signaling room for flexibility and negotiation, analysts at the moment are reconsidering earlier danger situations. The chance of resumed dialogue and a much less aggressive stance from Beijing might set off a aid rally throughout commodities, gold, and even risk-on belongings like Bitcoin if provide chain fears subside and international commerce frictions reasonable.

What the rare earths transfer means for gold and Bitcoin

Whenever authorities stockpiles and resource nationalism re-enter the image, gold’s standing as the final word protected haven will get bolstered. Yet this time it’s nuanced. The rush for battery metals and rare earths alerts that “strategic worth” is increasing past simply gold bars within the basement.

Commodity buyers might see a shift in portfolio methods, with gold retaining its hedger-of-last-resort standing however now joined by new “security minerals” as safety towards geopolitical shocks.

Should these measures escalate, gold may gain advantage from renewed protected haven flows, particularly if China responds tit-for-tat and monetary markets wobble. However, if China’s softening stance leads to constructive talks and stabilization of provide chains, gold’s rally could also be tempered by a broader risk-on restoration.

As for Bitcoin, its attraction as “digital gold” has at all times hinged on shortage, censorship-resistance, and detachment from the bodily world.

But the Pentagon’s mineral hoarding highlights one in every of Bitcoin’s paradoxes: it’s immune to provide chain disruptions, but uncovered to wider risk-off sentiment. If commerce tensions worsen, buyers might rotate into USD, gold, and, probably, Bitcoin, in search of shelter from FX and commodity volatility.

Bitcoin miner stashes traditionally swell in periods of macro uncertainty, though the asset itself could commerce extra like risk-on tech within the quick run. In the meantime, provide chain disruptions in {hardware} markets (chips, rigs, semiconductors) might ripple by Bitcoin mining economics however received’t contact the core shortage narrative.

If China’s tone stays conciliatory, crypto markets and danger belongings might see a rebound as worst-case situations unwind. As The Kobeissi Letter posted:

“If President Trump responds and de-escalates on Sunday, markets are set for an enormous soar on Monday.”

With the Pentagon and Europe stockpiling minerals, the definition of “retailer of worth” is altering. Gold isn’t getting much less related; it’s getting competitors. Bitcoin’s attract endures, particularly for buyers weary of presidency management or bodily limitations.

And whereas $1 billion is likely to be a drop within the international resource bucket, the symbolism speaks volumes. As Gold Telegraph on X commented: