• Inflationary pressures are rising- the signs are compelling

• Gold and silver tend to thrive in inflationary environments

• Platinum and palladium are precious metals that clean toxins from the air

A growth stock is any share in a company that is anticipated to grow significantly above the market’s average growth rate. Growth stocks are usually companies that reinvest any earnings they accrue to accelerate growth in the short-term. In 2020, the technology sector was, by far, the growth area of the stock market.

In 2021, there will be plenty of companies that follow the course toward growth. When it comes to asset price growth, the worldwide pandemic’s legacy will remain a factor for many assets over the coming years. Protecting against the declining purchasing power of money could be one of the most significant factors given the explosion in liquidity and stimulus that have caused deficits to swell to unprecedented levels. One area that traditionally protects market participants from the erosion in money’s purchasing power has been precious metals.

The Aberdeen Standard Physical Precious Metals Basket Shares ETF product (GLTR) is unique. While it is not a traditional growth stock, it stands a good chance of outperforming the overall stock market in 2021. The product holds four precious metals, including gold, silver, platinum, and palladium. Gold and silver tend to perform well during inflationary times. The two platinum group metals have industrial applications that clear toxins from the environment.

Inflationary pressures are rising- the signs are compelling

Inflation is an economic condition that eats away at fiat currencies’ value. In 2020, central banks unleashed a tidal wave of liquidity and pushed short-term interest rates to historic lows. Simultaneously, government stimulus programs increased the money supply and deficits. The US Treasury borrowed a record $3 trillion in May 2020, over five times more than the previous $530 billion in borrowing from June through September 2008. In 2021, the Treasury will be borrowing trillions more.

The Fed’s quantitative easing program at a level of $120 billion per month seeks to keep rates low further out along the yield curve. However, the rising inflationary pressures have been pushing rates higher despite the central bank’s asset purchases.

Source: CQG

Since putting in a bearish reversal on the monthly chart in August 2020, the 30-Year Treasury bond futures have moved lower in five of the past six months. In January 2021, the long bond futures fell to the lowest level since early 2020, breaking through technical support at the March 2020 169-09 low. The long bond futures were trading at the 168-18 level on Thursday, January 14. Inflationary pressures tend to push interest rates higher and bonds lower.

In other inflationary signs, copper recently reached the highest price since early 2013 when the red metal traded to $3.7340 per pound this month. Lumber rose to an all-time high of $1,000 per 1,000 board feet in September 2020, with the nearby contract above $800. NYMEX crude oil, the commodity that fell below zero last April, was above $53 per barrel on January 14. Grain prices have exploded to the highest levels since 2014. Bonds and commodities are signaling that inflationary pressures are not on the horizon but have arrived with a vengeance.

Gold and silver tend to thrive in inflationary environments

Gold and silver are barometers of inflationary pressures. In August 2020, the yellow metal rose to an all-time high in US dollar terms when it reached $2063 per ounce. After falling to a low of $11.74 during the risk-off price action in March, silver reached $29.915 in August. Silver moved from the lowest price since 2009 to the highest since 2013 in only five months.

Gold and silver prices pulled back from the August highs, with gold at the $1850 and silver at $25.80 on January 14. Gold and silver continue to consolidate after substantial gains in 2020. Gold was 24.42% higher last year, and silver rose by 47.38%. The long-term gold and silver trends remain higher, even after the recent pullbacks from their August highs.

Source: CQG

The quarterly gold chart displays nine consecutive quarterly gains. A close above $1901.60 at the end of March would mark the tenth.

Source: CQG

The highly volatile silver market displays a bullish price trend of mostly higher lows on its quarterly chart.

The price tag for liquidity and stimulus is likely to be years of inflationary pressures, which should push gold and silver prices higher.

Platinum and palladium are precious metals that clean toxins from the air

Platinum and palladium are precious metals, but they have significant industrial applications. Palladium has been in a bull market since reaching a low of $180 per ounce in 2008.

Source: CQG

The quarterly chart highlights that palladium took off to the upside after trading to a higher low of $451.50 in early 2016. The most recent high came at the start of 2020 at $2815.50. At over the $2420 level on January 14, palladium remains a bullish beast.

Source: CQG

Of the four precious metals that trade on the COMEX and NYMEX divisions of the CME, platinum has been the laggard. Investment demand likely suffers from memories of the brutal price carnage in 2008 that took the price from a record high of $2308.80 to a low of $761.80 in only ten months. In 2020, platinum fell to a lower low of $562 before recovering to over the $1000 level in early 2021. Platinum traded to a high of over $1125 this month, the highest level since July 2016and was near the level on January 14. The critical technical resistance level in the platinum market stands at around $1200 per ounce.

Platinum and palladium are metals that are critical ingredients in the catalysts that clean toxins from the air. The metals are used in automobile catalytic converters, oil, and petrochemical refiners and have other industrial applications as they are dense and have high resistance to heat.

The US will shift to a greener path under the incoming Biden Administration with a majority in both Congressional houses to support his plans. The demand for platinum group metals is likely to rise over the coming months and years.

GLTR holds a basket of the four metals

I view precious metals as a growth sector for 2021. A product that holds physical positions in all four metals is the Aberdeen Standard Physical Precious Metals Basket Shares ETF product (GLTR). The most recent top holdings and fund summary for GLTR include:

Source: Yahoo Finance

GLTR has net assets of $841.87 million, trades an average of 39,806 shares each day, and charges a 0.60% expense ratio. The ETF provides diversified exposure to the four precious metals.

Source: Barchart

GLTR moved from $76.40 to $98.95 in 2020, a gain of 29.52%. At the $96.79 level on January 14, the ETF is slightly lower than the closing level on December 31, 2020. I expect GLTR to continue to post gains in 2021 as the ETF holds the metals that will shine in an inflationary environment and clean toxins from the air as the US moves towards a greener path.

Precious metals should continue to offer investors and traders growth potential in 2021.

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GLTR shares were trading at $95.89 per share on Friday morning, down $0.52 (-0.54%). Year-to-date, GLTR has declined -3.09%, versus a 0.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Andrew Hecht

Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...

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