Why the Galaxy Resources Limited share price has rocketed 45% in a month

The Galaxy Resources Limited (ASX:GXY) share price is up 45% in one month. Is it too late to invest?

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The Galaxy Resources Limited (ASX: GXY) share price is once again among the biggest movers on the market today.

At the time of writing the lithium miner's shares are up almost 3.5% to $2.76. This latest gain means that its shares are up a massive 45% since this time last month.

Why have its shares gone gangbusters?

As well as delivering a strong full-year result with a positive outlook for the year ahead, Galaxy was given a major boost recently when Chinese regulators advised that they are looking into banning the production and sale of petrol and diesel engine vehicles in the future.

While both the United Kingdom and France have recently announced similar plans, the massive China market has the potential to cause a real surge in lithium demand over the next decade if Chinese officials go ahead with these plans.

After all, according to Statista, there were 194 million vehicles on Chinese roads in 2016. This was an increase from 172 million a year earlier.

Considering the high levels of pollution that vehicles produce, a shift to electric vehicles seems to be a logical step forward and an inevitability in my opinion.

If demand does grow as strongly as expected, Galaxy and its lithium miner peers Orocobre Limited (ASX: ORE) and Kidman Resources Ltd (ASX: KDR) are likely to benefit from increasingly higher prices for lithium carbonate. The metal is a key ingredient in electric vehicle batteries and those used in smartphones and renewable energy.

Should you invest?

Whilst I think Galaxy is a great buy and hold investment option in the resources sector, its shares are more volatile than most.

In my opinion this would make it unsuitable for the average investor. But if your risk profile is higher than average, then I think Galaxy could be well worth considering today.

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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