• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

Industrials Metals vs. Precious Metals Rotation Is Getting to Silly FOMO Levels

Everyone wants to chase everything that has not moved yet, but not knowing why.
By MALEEHA BENGALI
Nov 24, 2020 | 10:00 AM EST
Stocks quotes in this article: PICK, GDX, SILJ

All throughout 2020, the world was gripped with panic from the pandemic and the ensuing debt the world would have to endure to repay all the money borrowed (aka, printed). Gold and Silver were added as precious (no pun intended) holdings for any portfolio looking to survive this year. It no longer made sense to just own Equity/Bonds with the 60/40 mix that has worked all throughout the last decade on the back of deflation. We have to assess a new world order portfolio, one which has a careful weighting of Equities, Gold/Silver, Commodities, Convertible Bonds, and some Volatility. This is going to truly be the hedge in the next decade. We know Bonds are dead as an asset class, they will move lower eventually as inflation rears its ugly head, but will be supported by the Fed to keep yields artificially low. So just owning the 60/40 portfolio will not do anyone any good.

Most people think about Gold, and its rather racier brother Silver, as tools used when there is uncertainty/deflation or growth slowdown worries. Be that as it may, but there are also far stronger relationships between Gold and Silver to inflation. Given that globally central banks have printed in excess of $30 trillion in balance sheet expansion, with no end in sight, possibly more, the debt is only going one way, higher. Inflation is matter of when, not if. But what is important to note is that as inflation goes higher, real yields will move lower as the Fed will never allow gross yields to rise much as it may shake the financial system that is fragile anyway. As real yields move higher, which they are now as well, Gold and Silver will both benefit. The lower Dollar also helps, but it seems recently both Gold and Silver have broken away from that relationship as well. What is going on?

Following the U.S. elections rally as Gold got to $1960/oz. and Silver as high as $26.20, they have since retraced about 8% and 11%, respectively. The Gold and Silver Equities have fallen about 20% plus. Over the last three weeks we have had some incredibly good news on the vaccine and it seems the world is closer to finding some sort of relief from this dreaded virus that has killed people, businesses and changed life as we know it. But what this piece of good news did was to ignite an aggressive unwind when now every investor thinks we will have inflation going forward, massive GDP growth, and a Fed that is happy to sit and watch the show. This caused money to go into all the cyclically geared names that had been lagging like Energy, Copper, Iron Ore, Steel - all part of the industrial complex that were strong throughout summer given China's insatiable demand to begin with. The last three weeks has seen a sudden surge higher in Industrial Metals (iShares MSCI Global Metals & Mining Producers ETF (PICK) ) has rallied 20% and the VanEck Vectors Gold Miners ETF (GDX) or the ETFMG Prime Junior Silver Miners ETF (SILJ) index fell 15%. The last two days have just gotten to a level whereby charts are looking parabolic as the street chases Oil names, up 7% everyday, even though the Oil price is still around the $46/bbl. level where it has been since the summer. The move is correct, but the extent of it and timing of it seems debatable.

When charts go parabolic it smells of last minute "late to the party" traders chasing their tails, it smells of FOMO trading. Assets like Bitcoin are rallying on back of Fiat currency debasement as central banks print more, now followed by the racier alt coins, Ripple and Stellar all up 40%+ just in 1 day. Everyone wants to chase everything that has not moved yet, but not knowing why. If we are in a world, where central banks are debasing Fiat currency, and printing more, then why should Silver or Gold be left behind? The same argument holds true then for them as well. It seems the massive unwinding of portfolios into Thanksgiving has caused a reset outside of fundamentals that are driving the space to begin with.

Investing is all about risk vs. reward. It may be right to price in vaccine optimism, but it does not mean the recovery will be in one straight line and in one day. We still have so many logistical hurdles to get through. One may miss the top or the bottom entirely but no one ever killed the trader for taking profits. But one can be fired for chasing the last print literally at a 90-degree angle from one's screens today.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Maleeha Bengali had no position in the securities mentioned.

TAGS: Bitcoin | ETFs | Federal Reserve | Gold | Interest Rates | Investing | Markets | Stocks | Trading | Metals & Mining

More from Investing

Mega-Cap Tech Keeps Showing Wall Street Who's Boss

James "Rev Shark" DePorre
Jun 1, 2023 4:28 PM EDT

The action broadened on Thursday, but a small group of big stocks still dominated.

Dollar General Gets Busted Down to Lieutenant

Bruce Kamich
Jun 1, 2023 1:45 PM EDT

The charts advise marching in the other direction for this retailer.

New BlackRock Funds Rely on Brainpower

Mark Abssy
Jun 1, 2023 1:14 PM EDT

Artificial intelligence is all the rage, but the BlackRock Large Cap Value and the BlackRock Flexible Income exchange-traded funds offer a bit of human touch.

I Don't See Any Fireworks Coming From Macy's

Bruce Kamich
Jun 1, 2023 1:06 PM EDT

This iconic retailer appears only headed lower after posting earnings.

Here's How Investors Can Get in on Soaring Uranium Prices

Bruce Kamich
Jun 1, 2023 12:33 PM EDT

The charts of this fund are giving off a positive glow.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 06:54 PM EDT CHRIS VERSACE

    AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

    Listen in as the Action Alerts PLUS Podcast tackle...
  • 12:07 PM EDT STEPHEN GUILFOYLE

    Selling Some of This Surging AI-Related Stock

    This isn't the only name in the Stocks Under $10 p...
  • 09:48 AM EDT CHRIS VERSACE

    AAP Podcast With Portillo's CEO!

    Listen in as we talk with a rising star in the Chi...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login