Often the receiving end of a dubious spotlight, molybdenum itself is a multi-utilitarian element, one that has characteristics in common with its much more illustrious cousin silver. Discovered relatively recently in 1778 by Carl Wilhelm Scheele and later isolated in its pure form by Peter Jacob Hjelm, molybdenum is a silvery metal with a gray cast and has the sixth highest melting point of any element. Its ability to form hard, stable carbides makes it an ideal material for steel alloy processes. The element is also found as a biological catalyst, thus making it an essential component for advanced life organisms. These and other functional characteristics provide the fundamental basis for molybdenum as a potential investment idea.
Unfortunately, molybdenum has a “bad boy” reputation amongst the precious metals community. It has been vigorously alleged that molybdenum is a choice element for (fraudulently) mimicking the physical aesthetics and density of silver. Much of the allegations are hearsay and lack evidentiary provenance ; indeed, rumors of Chinese “molybdenum coated” silver rounds have been circulating various internet forums since the beginnings of the most recent precious metals bull market. Some of the rumors have been authenticated, with Michael Maloney’s GoldSilver.com being perhaps the most prominent example of a verification of fraudulent activity. However, the mere existence of illegality should not impugn the instrument used for such illicitness.
Those that are extremely wary of the “molybdenum scam” should find comfort in investing in the metal itself. After all, even the most fervent con artist is not in a hurry to “counterfeit a counterfeit,” so to speak! But there are plenty of directionally positive trends within the molybdenum market to advantage. First and foremost is its performance in the commodities sector : over the past six months, the contract price of molybdenum oxide has increased approximately 35%, easily outpacing the year-to-date performance of both gold and silver bullion, and is ahead of even palladium’s wild rocket ride thanks to the increasingly tense belligerence of Putin’s Russia.
Second, the supply demand picture is very bullish for molybdenum as it is for the monetary and industrial precious metals. The key players are China and the emerging markets, with unprecedented demand in previously underserved economic regions adding strain to an already stressed situation. For example, in 2009, China produced 50% of the world’s steel, but only consumed 30% of global supply. If Chinese industries ramp up operations requiring molybdenum-based alloys, competition for resources will be fierce amongst both regional powers and international conglomerates. As per Economics 101, the pressure on supply naturally lends itself to an equitable solution through price amplification.
Then there are the opportunities in the mining industry. Of the two primary North American molybdenum producers, General Moly Inc. (AMEX : GMO) is the most accessible to U.S. investors. With an average trading volume level of over 300,000 and a share price valuation that has been gutted down into the single digits, GMO also happens to be one of the better supported value-plays. The prolonged commodities sell-off which has been the trademark of the sector eventually sent GMO down to a historical low of 82-cents in April of 2014. Since then, shares moved up 52% at its peak and the overall price action is finding inclining support as its 50-day moving average finally trends positively.
While not the most marketable metal in existence (just how do you pronounce it, exactly?), molybdenum serves multiple uses that industrial and biological life could not do without. As a financial investment, the current spot price of the metal is unlikely to support growing demand, especially if the emerging markets move towards higher production and quality standards. Therefore, look to molybdenum as a potential wealth-maker during this period of global economic transition.