Why is the Core Lithium (ASX:CXO) share price surging 15% today?

The lithium player is charging higher today.

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The Core Lithium Ltd (ASX: CXO) share price is surging 15% higher today and currently trades at 48.5 cents apiece.

Shares in the lithium explorer have now rallied 21.5% in the past week, against a backdrop of strong commodity markets and recent project developments.

While there has been no market sensitive information for the company today, it’s worthwhile diving a little deeper to understand what’s behind the gains today.

Why is the Core Lithium share price climbing 14%?

News last month that the company made its final investment decision regarding the Finnis Lithium Project wasn’t enough to spike Core Lithium’s shares at the time.

The company expects the maiden production of lithium to commence by the end of 2022 and the project is fully funded after recent injections of capital.

Its shares traded sideways until the start of October when investors began bidding up their price again.

One factor that could be lighting a fire under the Core Lithium share price is the premium that lithium is fetching in the spot and futures markets.

Lithium shares have been hot contenders on the ASX this year with lithium prices soaring more than 300% in the last 12 months to now trade at A$34,882.35/tonne.

Lithium contracts popped again in August. At this time, the rate of change triggered another 100% jump in pricing to reach all time highs of A$37,630.66 just two days ago.

This was after an 8% jump over the weekend to roll into the start of trade on Monday.

Core Lithium’s exposure to the silvery-white metal means that its share price can and does fluctuate with volatility in the broader commodity markets.

That’s because it is a price taker that must accept the going rates for the markets it sells into. As much is true for all ASX resource companies that produce a commodity.

With this in mind, it makes sense as to what might be fuelling investors’ buying activity today.

And the strengths appear to be carried through the broader sector as well. The Battery Tech & Lithium ETF (ASX: ACDC) – a good proxy to gauge growth in the industry – is also climbing 1.2% higher so far today.

Core Lithium share price snapshot

The Core Lithium share price has soared this year to date, posting a gain of 234% since January 1.

This extends its gain over the past 12 months to 870%, a whole solar system away from the S&P/ASX 200 Index (ASX: XJO)’s return of about 20% in that time.

Should you invest $1,000 in Core Lithium right now?

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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