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Real Time Insight

Copper--known as the metal with a PhD in Economics--has been a reliable barometer of global economic health in the past. The metal derives this predictive ability from its extensive use in energy generation and distribution, building products and electronic equipment.

Copper prices have usually led the market rally but not this year. The S&P 500 index is up almost 10% year-to-date, but copper prices are down about 3% this year. Further, in the last three months, inventories have gone up more than 100%--the fastest rate since the crash in copper prices in 2008. 

One of the main reasons for Dr. Copper’s lackluster performance appears to be China—the largest consumer of copper in the world. Chinese demand is down while the supply in the country has been going up. In other parts of the world too, copper mines have been increasing their output.

Last week, Goldman Sachs said in a report that the pull back in copper driven by Chinese concerns was excessive and that the demand in China would rise in the second quarter, leading to an increase in copper prices.

Let us know what you think:

A)   Sell-off in Copper is overdone and the prices may be bottoming out now?

B)   Copper prices are actually reflecting the real picture of global economic health while the stocks have been going up mainly due to massive liquidity pumped in by the Fed?

C)   Copper is no longer a barometer of global growth?

D)   Other (please give reasons)

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