Silver Correlates Better With Yield Rise Than Gold

But copper and iron are outpacing the yield rise. For now.

The stock market is responding favorably to today's auction of 30-year Treasury bond, although it has come off the high of the day. (It is possible it will end up flat, yet again, like the past 4 trading days.)

But yields have been rising on long dated Treasuries, most notably 10-year note and 30-year bond. Treasury/Fed/Government spin is that the economy is recovering. Maybe. Maybe not. I also hear a lot of inflation talk, even hyperinflation talk. Jim Rogers has said that Dow could go to 100,000 (or some outrageous number like that), and a quart of milk could cost $10.

Even the staid broker like Fidelity (I use them) puts out an article about how to profit from falling US dollar and rising inflation. Their recommendation: gold, silver, commodities. (They also recommend REITs and TIPS, but never mind them for now.)

So I plotted gold (via gold ETF GLD), silver (SLV), 10-year note yield (TNX) and 30-year bond yield (TYX) on a 6 month daily chart. (I threw in Apple (AAPL) just for fun, and surprisingly it correlates to silver pretty well.) First to note is silver's outperformance over gold in the past 6 months. Second, notice how well silver correlates with the Treasury yields. SLV is a thin blue line buried among TNX, TYX, and AAPL.

So the better inflation trade is silver?

Maybe. Maybe not. This second chart adds a few more names - companies that deal in other metals: Freeport McMoran (FCX, copper), Rio Tinto (RTP, aluminum, copper, gold), Mechel (MTL, iron ore, coal, steel), and AK Steel (AKS, steel). They are all outpacing the Treasury yields.