From precious metals to critical minerals: Pentagon’s multi-billion dollar investment in U.S. resource security

The Pentagon typically does not engage in commodity speculation, but when national security is involved, expect traditional norms to shift. According to the Financial Times, the U.S. Defense Department has initiated a $1 billion initiative to accumulate essential minerals such as rare earths.

This initiative encompasses a range of materials from rare earths to strategic metals required for electric vehicles, fighter jets, and semiconductors. The objective? To enhance domestic resilience and reduce reliance on a Chinese supply chain that has proven unreliable.

The effort to acquire up to $1 billion in critical minerals is part of a worldwide stockpiling strategy aimed at countering Chinese influence. It reflects a strategic shift reminiscent of Cold War-era stockpiling initiatives. In the past, it was oil; today, it includes lithium, cobalt, nickel, and rare earths. Essentially, these are the components found in Teslas, missile guidance systems, smart bombs, and high-frequency radars.

Concerns regarding supply chains have been escalating for years, but they reached a tipping point after China implemented new export restrictions on rare earths and other strategic materials. This action immediately triggered significant disruptions across global markets, including Bitcoin and cryptocurrency, with Donald Trump expressing his views on Truth Social:

“China is ‘becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it’s not manufactured in China.’”

The Pentagon’s initiative is not speculative; it represents a defensive strategy. This marks one of the most substantial mineral procurement efforts in decades, and Washington is not acting alone. Brussels and European allies are also hastening to catch up, stockpiling in preparation for potential conflicts and energy transitions.

China offers markets a reprieve

In a recent development on Sunday, Beijing seems to have softened its position. China characterized its recent export controls as “legitimate,” emphasizing that they comply with international law and are intended to protect global peace and stability (not to provoke economic warfare).

Crucially, China clarified that these controls do not constitute absolute bans, noting that export applications that meet specific criteria will still be approved, and communication channels with major trading partners remain open. Chinese officials stated that the controls do not equate to export bans and that applications fulfilling the criteria will be granted approval.

This more conciliatory tone should help alleviate investor concerns. With China indicating a willingness for flexibility and negotiation, analysts are beginning to reassess previous risk scenarios. The potential for renewed dialogue and a less confrontational approach from Beijing could spark a relief rally across commodities, gold, and even risk-on assets like Bitcoin if supply chain anxieties diminish and global trade tensions ease.

Implications of the rare earths initiative for gold and Bitcoin

<pWhenever government stockpiling and resource nationalism resurface, gold’s reputation as the ultimate safe haven is reinforced. However, this time the situation is more complex. The demand for battery metals and rare earths indicates that “strategic value” is extending beyond merely gold reserves.

Commodity investors may experience a shift in portfolio strategies, with gold maintaining its status as the last-resort hedge but now accompanied by new “security minerals” as safeguards against geopolitical disruptions.

If these actions escalate, gold could see an influx of safe haven investments, particularly if China retaliates and financial markets experience instability. However, if China’s softened stance leads to productive discussions and stabilization of supply chains, gold’s upward movement may be moderated by a broader risk-on recovery.

Regarding Bitcoin, its appeal as “digital gold” has always relied on scarcity, resistance to censorship, and independence from the physical realm.

However, the Pentagon’s mineral accumulation underscores one of Bitcoin’s contradictions: it is insulated from supply chain disruptions, yet vulnerable to broader risk-off sentiment. If trade tensions escalate, investors might shift towards USD, gold, and potentially Bitcoin, seeking refuge from foreign exchange and commodity volatility.

Historically, Bitcoin miner reserves tend to increase during periods of macroeconomic uncertainty, although the asset itself may behave more like risk-on technology in the short term. Meanwhile, disruptions in hardware markets (chips, rigs, semiconductors) could impact Bitcoin mining economics but will not affect the fundamental scarcity narrative.

If China’s tone remains amicable, crypto markets and risk assets could experience a rebound as worst-case scenarios dissipate. As noted by The Kobeissi Letter:

“If President Trump responds and de-escalates on Sunday, markets are set for a big jump on Monday.”

With the Pentagon and Europe accumulating minerals, the concept of “store of value” is evolving. Gold is not becoming less significant; it is facing competition. Bitcoin’s appeal persists, particularly for investors wary of government intervention or physical constraints.

While $1 billion may seem minor in the context of global resources, the symbolism carries significant weight. As Gold Telegraph remarked on X:

“The race is on.”

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