The precious metals market has gotten a lot of attention over the past year, mostly for the 30%+ rally in gold prices so far this year. Whether it’s because investors are using it as a downside hedge (which may or may not work), a risk hedge (which usually works) or an inflation hedge (which probably works), gold has garnered a lot of interest.
Gold, obviously, feeds directly into my lumber/gold signal. Because it has performed so strongly this year, the signal has mostly been risk-off, so I view this rally as a sign that investors in risk assets should be cautious. As I say that, however, the S&P 500 is up around 23% on the year. Is it normal that gold and U.S. large-caps are posting those kinds of returns at the same time? In a word, no.
But while gold has been getting most of the attention, its precious metal counterpart, silver, has done even better! It’s up about 40% on the year. Of course, it fits in the “precious metals” category because of its uses in things, such as jewelry and silverware, but it’s the versatility in industrial applications that makes it perhaps even more precious.
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