You can often judge the health of an economy by the price of copper in the marketplace. Whether moving or remaining stagnant, the value of copper is a surefire indicator of the ‘real’ and authentic state of economic health. The reason for this is largely due to the fundamental need for copper in everyday use, such as pipes, wiring, cooking, and now electric cars.
Since the beginning of the US-China trade wars that arose with Trump, copper and soybeans have had the most devastating downtrend compared to other metals and commodities. Thus the Federal Reserve may be anticipating a global slowdown, which explains their decision to raise interest rates. Regarding true-cost economics, you can only borrow so long on cheap (fake) money until it’s time to pay it back. We need to look more realistically at the state of affairs.
Hope for Copper?
If we were to fathom one breakout star in the commodity sector, copper is it. This of course would require some negotiation with the Chinese to help alleviate friction on industrial metals because of tariffs. Copper is still used heavily as a basic necessity of modern civilized society—something that seems wanted no matter what the market is doing.
Edward Egilinsky, managing director of Alternative Investments at Direxion weighs in on the copper outlook for 2019 on Kitco NEWS.