Wednesday, May 29, 2024

Dr. Copper has a lot to say...

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Liberty Through Wealth

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What Does This Commodity's Chart Tell Us?

Matt Benjamin, Senior Markets Expert, The Oxford Club

Matt Benjamin

When the economy and the stock market send mixed signals (as they are doing now), it's always good to check in with the good doctor.

I'm talking about Dr. Copper, of course.

This is because the price of copper has historically been accurate at predicting the direction of the economy. The red metal earned the nickname "Dr. Copper" because it seems to have a Ph.D. in economics.

It's not just a quaint Wall Street adage either.

A statistical analysis by Dutch investment bank ABN AMRO found a strong correlation between the price of copper and global trade volumes, economic growth in both China and the U.S. and prices of other commodities.

And it's a leading (not lagging) indicator, as copper must be purchased long before factories, homes, cars, semiconductors, data centers and electrical equipment - among many other products - can be produced. Therefore, in bidding the price of copper up or down, markets are anticipating broader economic activity.

So, what does the price say now?

Discover the Answer in This Chart
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