For years, analysts and economists would always watch precious metals’ performance (especially gold’s) to assess the future changes in commodity prices, especially inflation and weaknesses in global economies.
However, the experts’ attention has already shifted to base metals, now that most countries are no longer depending on gold and silver when it comes to shaping their respective economies.
Using base metals as an economic indicator is effectual simply because most countries depend on manufacturing, infrastructure development, and construction to expand their respective economies. All these economic-expansion endeavors would need to rely on these natural resources called base metals in order for them to materialize. In other words, no country could build modern cities without using steel and wires—industrial products made from base metals such as zinc, nickel, lead, tin, aluminum, and copper.
Demand for base metals
Consumer demand for these base metals is what dictates their prices. Plummeting prices could mean a looming economic predicament, imbalance in the supply-demand segment such as overabundance in supply. A supply deficit, however, could lead to skyrocketing prices. Basically, market prices follow the unspoken law of supply and demand, in which “low supply and high demand” translates to high prices, and “great supply and low demand” means lower prices.
Among all base metals, it is copper that gained its reputation as a reliable barometer of global economic health, earning it the moniker, “Dr. Copper.” It is most widely used both by emerging and continuously growing economies.
Copper is the only base metal that is used in all aspects of industrialization. It is essential for electrical wiring, plumbing, automobile, aerodynamics, appliance, and radiators—in short, it is an indispensable material in engineering, architecture, and industrial design.
By simply watching its price and assessing how a specific economy is doing with copper, analysts could predict certain circumstances that might happen not only to a specific country’s economy but also to the entire global economy.
Copper demand is an effectual economic health indicator because rising metal prices mean growth while falling prices translates to an economic slowdown. In 2008, it would be noteworthy to state that economists, market experts, and even journalists clung to copper prices to help the world prepare for the forthcoming global recession.
Doubts on copper as indicator
You can’t please everyone they say, and this goes for copper as well. There are entities claiming that copper’s strength as an indicator is now a thing of the past.
Among these few is Brinker Capital senior portfolio manager Andrew Rosenberger who said that correlations have certainly broken down between equities and copper prices. This is because data on the metal prices and US equities show a few disparities that could create misleading analyses harmful to the global economy.
The disparity is directed to the US equities’ rising prices and growing economy amid falling copper prices. Following the Dr. Copper system, falling copper prices translates to weakening the economy and bearish prices. With this, Rosenberger concluded that it could be high time to give up on copper as a dependable economic barometer.
This may be an isolated case, but MarketWatch flippantly said that copper “deserves a malpractice suit” for such. But most analysts, economic experts, and news agencies still depend on copper’s market performance to understand the health of global economy.
Today the copper market is at its weakest point. Trading after trading, the base metal crashes in prices, recording its lowest levels in seven years. Such a disappointing performance shocks experts, as this signals a possible repeat of the grueling 2008 global financial crisis. And if we are to rely on copper’s health to predict the economy’s future, then we must hope that it gets bullish anytime soon now.
CrowdFundMe launches CFM board, the bulletin board for buying and selling company shares
CrowdFundMe has launched a digital bulletin board called CFM board. To date, the platform has received positive feedback from users,...
LODE Markets: the digital “Amazon” of Gold and Silver
The on-demand economy has made it easier than ever to acquire products and services with the click of a button....
Will the price of Bitcoin enter the bear market territory?
As paradoxical as it may sound after this week, in the weekly view, the price of Bitcoin is still in...
Bank of Africa is expanding its network of partners
Bank of Africa-BMCE Group multiplies its cooperation projects with leading economic actors. Through these partnerships, the group is strengthening its...
a2censo raised $700 million for Aoxlab, the largest campaign it has ever run
The company a2censo has recently raised $700 million for Axolab. The resources obtained in the collaborative ecosystem will allow them...
Best of Born2Invest5 days ago
Silver Supply Shortage: What Investors Need to Know
Crowdfunding6 days ago
Before investing in crowdfunding, be aware of the structure surrounding the platforms
Crowdfunding4 days ago
Mazzanti manufacturer launches a STO after three equity crowdfunding campaigns
Business5 days ago
A look at the sudden steep rise in interest rates at the long end of the curve