Gold Moving From Laggard to Leader?

But not the one you’re thinking of. 

As you can see in the graph below, gold, as measured by the SPDR Gold Trust (NYSE: GLD), has actually underperformed the S&P 500 for the last year. But silver, palladium, copper and platinum have trounced it. 

                      

So why are these non-gold precious metals experiencing such a dramatic bull market? And what’s in the near future for commodity investors?
 
Why Non-Gold Precious Metals Are On A Tear 

Ultimately, there’s a one-word explanation for these bull markets: cars. Auto industry experts believe that global auto sales could rebound 10% this year, as COVID-related mobility restrictions are relaxed around the world. 

The auto industry uses some 55 million ounces of silver each year, largely as a conductive material for electrical contacts. 

Palladium and platinum, meanwhile, are critical components in catalytic converters —devices that use chemically-reactive metals to produce chemical reactions that cook the most toxic components of car exhaust into less-harmful emissions. 

The US Environmental Protection Agency (EPA) has mandated catalytic converters for just about every internal combustion engine (ICE) since 1975 — and they’re getting stricter with their performance requirements over time. They adopted California’s stricter emissions standards nationwide in 2016 — and are currently working to develop even stricter standards for 2025. 

And while the demand for catalytic converter materials is increasing due to tightening emissions standards, the supply of the most favored metal for the devices — palladium — is being severely constrained by weak mine production. 

Citibank expects the palladium market to have a deficit of nearly half a million ounces this year — and expects the catalytic converter industry to consume an extra 375,000 ounces of platinum as a substitute. 

Copper is also an important component in internal combustion engines (ICEs); the average ICE car contains between 18 and 49 pounds of the red metal. 

But electric vehicles — which are expected to more than double in number by 2030 — contain an average of 183 pounds of the stuff. 

With all this in mind, it’s easy to see how the global post-COVID rebound in the auto industry is fueling these precious metal bull markets. 

But will that rebound continue? 

The Near-Future of Precious Metal Markets

To give another one-word answer: probably. 

It’s worth noting that the US is one of the most COVID-vaccinated countries in the world — and that many other countries, especially in Europe and Asia, are in earlier stages of reopening. 

This means that the post-COVID boom in auto sales could continue for months or years into the future. 

Many analysts also believe that the auto metals bull market could herald the beginning of a larger rally in commodities. 

In February, JPMorgan researchers said that a fifth commodity “supercycle” had started, predicting that a wide variety of materials would surpass their pre-pandemic highs in the years ahead. 

So while gold has been a laggard the past few months, it’s likely to join the ranks of outperforming commodities in the coming months. 

It’s now getting comfortable again above $1,800.

We’ve been tracking a small gold stock we think will help investors capitalize on the upcoming gold bull market. Click here to learn more. 

Call it like you see it, 
 

Nick Hodge,
Publisher, Resource Stock Digest
 

Nick Hodge is the co-owner and publisher of Resource Stock Digest. He's also the founder and editor of Hodge Family Office, Family Office Advantage, and Foundational Profits . He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.

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