Gold and Silver Outpace Working Class Metals

Posted by Greg Harmon
on November 22nd, 2010

Are the working class metals lagging behind Gold and Silver or are Copper, Platinum and Palladium ready to chase them higher?

Discussion around Copper generally centers on China’s need for endless supplies driving shortages and pushing prices much higher. The same argument holds for Platinum and Palladium the other working class metals. These metals are needed for basic home construction as well as complex mechanical and industrial systems. The downtown metals. On the other hand Gold and Silver are spoken of more for their value as an inflation hedge or intrinsic beauty. More like the uptown metals.

There was an interesting dichotomy between the two groups today. Look at the charts.

The Downtown Metals

Copper

Platinum

Palladium

These three working class metals, represented by the ETF’s, have similar chart patterns since peaking near November 10. They all bottomed between the 16th and the 17th and rose slightly since. Focus now on today’s price activity. All three traded immediately lower on the day, with Copper gapping down on the open. They all made a recovery in the afternoon to recoup some of the losses but did not recover the full down move. Now look at the Uptown metals.

The Uptown Metals

Gold

Silver

These also fell from a November 10 high and bottomed on the 16th. They also moved higher from there. But look at today’s price action. Both Gold and Silver had initial moves down but quickly reversed and then trended higher all day.

Why the difference? Checking out the overnight and pre-market futures activity in all 5 metals shows a similar pattern of a fall from the high starting in the early morning hours. But looking more closely the same pattern also continued throughout the day only with Gold and Silver a few hours ahead of the others. Almost as if Gold and Silver are leading and the working class metals are chasing them. I will be watching this potential lagged correlation again tonight and tomorrow to see if it holds. But I will not be surprised if it continues. After all Downtown men have a long history of chasing after Uptown girls. Trade well.

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