What’s Moving In Metals?
Well, it looks like the industrial metals to me. Yeah, the precious metals are moving too, but it’s the specialty industrial metals that have the most “juice”.
ETFs with physical metal holdings: GLD - Gold SLV - Silver PPLT - Platinum ( PTM is an ETN or note, using contracts) PALL - Palladium ETNs using contracts (futures, options) not physical metal: JJU - Aluminum JJN - Nickel JJC - Copper JJT - Tin DBB - Base Metals basket LD - Lead
We saw last week that the Platinum Group Metals Miners had a large gain. Looking at this chart we can see that it came from the Palladium part of the metals they mine. Physical platinum is not moving much. But the nickel and palladium used in many catalysts (and for nickel, used in stainless steel) are both moving nicely. Also Tin is rising. (Even lead has had a recent start of a rise.)
The PALL and PPLT funds are fairly new. They buy physical metal, like the GLD and SLV, and store it. The “ETN”s are exchange traded notes that use futures and options contracts, so they can have “contango” and “backwardation” issues as the present or spot price gets out of line with the futures prices. They also can have ‘wasting asset’ issues as the time value of an option degrades as it approaches liquidation. So “notes” are best as short term trade vehicles, not as long term investments.
What we can glean
OK, looking at the chart, we see the much ballyhooed Gold is not nearly as fast a clime as the metals with some industrial use, especially the ones in more limited supply ( like tin and palladium). Nickel, in particular, had a large spike just a while back, and is now rising after a drop. Over the 8 months that PALL has been in existence, Silver has outperformed copper, but in the last 3 months both have moved up nicely (even Lead has started a rise, with a large demand for lead-acid batteries for electric bikes in China.) Tin has had a nice steady rise over the 8 months and without the spike / drop of Nickel. DBB is a base metals basket and, not surprisingly, is running about the middle of the base metals. Between Lead and Copper and more or less tracking Aluminum.
What all this says to me is that demand for metals is rising, especially in the harder to find industrial metals. Miners in the Palladium, Nickel, and Tin areas are likely to be posting better profits in quarters ahead. Also, for a currency hedge, using Palladium along with Silver and Gold has some good points…
There are a bunch of minor miners that have more of these less talked about metals, but it will take some work to find who mines what. The major integrated miners, like BHP, VALE and RTP have them, but they tend to be swamped by the other things mined by the giants.
That the prices on the industrial metals are rising also says that someone somewhere is buying and that their economy is growing. I’d make that China, Brazil, Indonesia, India, …
Also, Palladium will be a nice alternative to the crowded Gold trade. Being both an industrial and a precious metal, it will rise with both monetary and industrial demand.