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Copper and Economy

June 1, 2008

Copper and Us

Copper and Us


In the past I have talked about some of the indicators which actually can give a very good idea of the macro economic scenario. Hemlines, about which I talked about here definitely form the esoteric of the indicators.

Taking a more serious look, copper prices can be an excellent indicator of the global economic scenario. Although it has its own critics(about which I will talk later), ‘copper’ logic has too many admirers.
Copper takes the ‘bronze’ medal for being the most used metal after iron and aluminum, and is perhaps equally traded in volume when it comes to gold and silver.

Copper has in many ways been the backbone of the global economy. With an active resistance to corrosion, fantastic ductility and excellent electrical and heat conductivity, it has brought itself into every aspect of our global production, right from electrical power plants to the plumbing pipes, Copper is there. What more it is even used in smelting of coins!
And the best thing about copper is that it is so, plentiful and actively mined that there is really no or very less speculative component in the copper price. Nobody really stores it, for tomorrow and is used as soon as it is mined. And hence to a huge extent copper prices, actually show the trend in its consumption and hence in its own way, shows the health of the economy.

People have often thus linked copper prices to global economy, and for the curious it actually is a leading indicator. That primarily because any slump in copper price, essentially means a business slump in some of the key industries across the world. Whereas a rising copper, denotes a healthier business growth.
This argument in its entirety form the basis of why, copper form such a good indicator of global economic health, for it is one thing which is used extensively in everything in our civilisation and yet has a very minimal speculative component to it.

There are some people who really don’t think there is any correlation, and this study has actually done some work in this regard. So if would like to hear to some contrary views, go ahead and read it. Its a good analysis. [Warning! Mildly technically oriented!]

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