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Forget gold/silver: these are the two metals you should be watching

Commentaries & Views

It was a rough week for Gold and Silver bulls, and sell-offs like what we saw last Thursday are why I stress building positions slowly and incrementally. I find it disturbing that the precious metals market began its selloff in the middle of the night and accelerated into the widely followed Retail Sales report release. Did it leak? I'm not going to go there.

Retail Sales are an important economic indicator because the consumer drives the economy, 5.7% of GDP to be exact. The forecasted number was to be -0.7%, which came out at +0.7%, further accelerating precious metals decline. There are two aspects to the number that made it important; first, it shows "growth" in the economy, and second, retail employs over 15 million of the U.S. working population. If growth improves and employment improves, the expectations for the Fed to taper or raise interest rates rises, which results in these temporary shocks to the precious metals markets. Those expectations pushed the U.S. 10-year Treasury yields to a two-month high at 1.385% and the U.S. Dollar to a three-week high.

Why am I saying that this selloff in precious metals is temporary? The consumer inflation in the Eurozone has accelerated far faster than their expectations, and they will need to be more "Hawkish" on their very own interest rate. That pushes the Euro higher and the Dollar lower, resulting in higher commodity prices across the board. Currently, the 90-day inverse correlation Dollar/Gold is -88%. To further help you understand the quantitative analyses of the precious metals markets, we created a free "Gold Trends Macro Book," updated with silver slides. You can request yours here: Free Gold Trends Macro Book.

Daily Palladium Chart

Platinum and Palladium have the best opportunity in the future, rebounding from its rapid selloff due to the chip shortage in the auto industry. Automakers have burned through the excess inventories of vehicles, and when chips become available, they will have to plug the demand hole immediately. Remember that automakers consume about half Platinum and three-fourths of the world's Palladium. We will be monitoring changes in chip production, auto assembly plants coming back online, and new and used car sales over the intermediate-term for a trigger to gain exposure to these markets. If you would like to learn more about the strategies we are implementing or get the top three things I'm watching delivered in your mailbox every week, please register here: "the top three things"

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.