Here’s the Paradox Destroying Rare Earth Stocks Now

Have you heard of rare earth metals (NYSE:REMX)? Well, according to Goldman Sachs (NYSE:GS), they won’t be rare for long:

“Demand for rare earth elements that has driven up prices more than tenfold since 2009 is likely to be met by a surplus of supply by 2013, as Western companies start up new mines to compete with the Chinese firms that now dominate the market.”

It will be interesting to see how much hot money flees the rare earth sector if more analysts agree with Goldman’s view. At the moment, the news is crushing the publicly traded stocks:

Molycorp, Inc. (NYSE:MCP) is down 3.6%, Avalon Rare Metals (AMEX:AVL) is down 6%, General Moly, Inc. (AMEX:GMO) is down 0.5%, Rare Element Res Ltd Ordinary Shares (AMEX:REE) is down 3.7%, China Shen Zhou Mining & Resources Inc. (AMEX:SHZ) is down 3.5%, and Market Vectors Rare Earth Strat Met ETF (NYSE:REMX) is off 0.45%.

One company bucking the trend is China GengSheng Minerals (AMEX:CHGS). The stock is up 3.5%.

Now don’t miss Wall St. Cheat Sheet expert contributor Ed Dolan’s awesome presentation: The Best Explanation Of Why Rare Earths Are A Bubble Just Waiting To Explode.

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