The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- Here at
we have been advocating gold as an investment for the last two years. On our weekly FRED Report conference call today, we highlighted our current thoughts. Readers can
but we also review the concepts below.
Historically, the metals' markets are much healthier when gold is outperforming. Another way of looking at this is to say that silver is the more speculative metal. Silver has more industrial uses and these tend to impact price. We saw the result of silver out-performance in April of this year when metals and commodities pulled back sharply.
There have been other instances, though -- the best one that springs to mind is the last secular peak in the metals in 1980 -- as the Hunt brothers tried to corner the market in silver (and the reason they did this was pure speculation at the end of a long-term up-move in the metals and inflation). We consistently warn that when silver starts to outperform we are in a dangerous period for commodities in general, and metals in particular.
This is more of a condition indicator rather than a timing tool: Silver outperformed for several months before the blowup came, and this gave lots of opportunity to lighten up on commodities. We did this in spite of a long-term, bullish stance on the commodity markets. Right now, since gold has hit new highs we judge it to be outperforming, although on any given day silver may be better for aggressive traders.
The way we look at it is: if we bought the high trade in the
Silver Trust iShare
in April we paid 48.35 and it is now around 39.17: a loss of 9.18. Whereas, if we bought the high trade in the
SPDR Gold Trust
we paid 153.03, and it is now 157.19: a gain of 4.16. Our point is gold is a better and more stable investment. We show weekly charts of GLD and SLV, below.
Gold and silver stocks are similar to the metals in some respects, but of course these also trade on company fundamentals. An example of two stocks that have similar patterns, yet show an out-performance in gold are these:
. Readers can see that while the patterns are similar, GG has outperformed a bit, at least relative to the recent highs in the metals.
Our favorite gold and silver stock ETF is the
PowerShares Global Gold & Precious Metals
. This ETF has performed in line with many gold stocks, yet provides an alternative way to invest in a portfolio of these names. Another ETF,
Market Vectors Gold Miners
, has got a similar trading pattern but costs more money. We show weekly charts of these below
Last, but certainly not least, we have discussed some alternatives to take advantage of what we believe is a new secular bull market in commodities. These are currencies and stock indexes of countries that have economies that are more heavily based on commodities.
Our favorites in this regard are Canada and Australia. We show charts of
MSCI Australia iShares
MSCI Canada iShares
Aberdeen Asia-Pacific Income Fund
Rydex Currency Shares Canadian
below. Theses currencies are somewhat overbought now, as are their stock markets -- but these look like good long-term buys on pullbacks -- especially the stock indexes.
Fred Meissner is founder and publisher of
. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.�A detailed bio is here: