Posted on 04/19/2024 6:48:02 AM PDT by Diana in Wisconsin
One trite Wall Street saying is that copper is the only metal with a PhD in economics. This is because copper is an industrial metal, the demand for which waxes and wanes with economic growth and shrinkage. So falling copper prices can be a sign that economic trouble lies ahead, and the converse is also true.
I would argue that copper's more reliable role is as a leading indicator of inflation, as illustrated in this week's chart. It shows the price of copper, shifted forward by 2 months to reveal how the growth rate of the Consumer Price Index (CPI) tends to echo copper's movements. The plot of copper prices uses daily data, whereas the CPI is monthly, and so naturally there is going to be more noise in the copper data.
Generally speaking the correlation has been good, although the first couple of years after Covid strained the correlation a bit. The copper market was arguably not functioning properly then, like so many other markets, with industrial demand and copper mining production both seeing turbulence from labor availability. But that seems to have settled down now.
The latest posting for CPI just out on April 10 caught many by surprise, but it reflects an up move which already started in copper from its December 2023 low. And the most recent jump to above $4/pound says that inflation is not yet done rising.
There is room to question the legitimacy of that message, since part of the rise in copper prices may have come from speculative trading in China. The Shanghai Stock Exchange just recently imposed trading limits on futures contracts for both gold and copper, in an effort to tamp down on that trading. So if this spike disappears rapidly, then one may be able to put a thumb over that point on the chart and disregard it. For now, though, the message is that inflation is going to be rising for at least the next 2 months.
I call them “economisseds”
I call them “economisseds”
You know a gold dealer who doesn't collect a commission? I want a phone number!
I know my son-in-law, who is a private banker in NYC, won't touch gold with a barge pole.
bttt
We have all heard how over the centuries an ounce of gold would always buy a tailored suit. This isn’t an wierd accident. There is an arbitrage between commodities+labor and gold.
Pundits right now are saying that it is puzzling that gold is up but gold miner stocks such as GOLD aren’t up more.
Many times when gold price rises from people speculating from charts and “tips”, and panicing out of stocks due to market rumors, gold miners do even better than gold itself.
I think when gold is up but gold miners aren’t “coining” :) money, it indicates you are really seeing monetary inflation. All the inputs to mining and refining are up - inflation is Leading gold. Energy needed to mine and refine, labor, land, food, machines.
So thats my take, copper may be a tell, but I think gold doing better than gold miner stocks is indication of gold responding to monetary inflation, which implies that it will not be retreating.
Oops sorry, the last post should have been to OP ‘Diana in Wisconsin’.
No, he gets his cut. I will PM you.
Gold flirted with $2,400/oz yesterday. Highest I’ve ever seen it. Inflation is here to stay for a good long while, IMHO.
Watched a YT yesterday and even prices on ‘cheap’ food at Aldi are up over 15% on avereage. A can of beans that was under a buck last year is $1.29 these days.
Plan accordingly, I guess. ;)
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