A colossal battery of economists and analysts across the globe put in hours every single day fussing over loads of data and charts. What they all try to do is to figure out the best way to predict the future of the global economy. And they often err.
For once leave them aside and instead try listening to these two metals: gold and copper. If you heard carefully, they say a lot about the health of the economy. Of course, they both have their own areas of specialty. Gold Prices usually gives a prompt diagnosis of monetary disorders and government failures. On the other hand, copper prices are a good barometer of industrial health.
The reason for the same is simple. Copper is widely used in the manufacturing of goods ranging from autos and plumbing pipes to semiconductors and telecom and cable wiring. Hence, a sharp dip in copper prices could mean a slip in industrial demand. Two years ago, when worldwide growth picked up after the crisis, copper had led the rally. And what is happening at the moment? After reaching the peak in mid-February, copper prices have fallen by almost 10%. And guess what? The recently announced US economic data is not really encouraging. And it is not just the US. Surprisingly, China has reported a trade deficit for the month of February. Certainly, this is largely attributable to the Chinese New Year slowdown. However, there are other signs of slowing demand in China as central bankers are nervously trying to combat the rising inflation.
Of course, one should not take metals prices blindly. They cannot be foolproof indicators all the time. There are times when they go to extreme ends. Nonetheless, they can at times predict what humans cannot. Copper especially can be a better indicator than gold because of its early warning signals as compared to the latter.
For once leave them aside and instead try listening to these two metals: gold and copper. If you heard carefully, they say a lot about the health of the economy. Of course, they both have their own areas of specialty. Gold Prices usually gives a prompt diagnosis of monetary disorders and government failures. On the other hand, copper prices are a good barometer of industrial health.
The reason for the same is simple. Copper is widely used in the manufacturing of goods ranging from autos and plumbing pipes to semiconductors and telecom and cable wiring. Hence, a sharp dip in copper prices could mean a slip in industrial demand. Two years ago, when worldwide growth picked up after the crisis, copper had led the rally. And what is happening at the moment? After reaching the peak in mid-February, copper prices have fallen by almost 10%. And guess what? The recently announced US economic data is not really encouraging. And it is not just the US. Surprisingly, China has reported a trade deficit for the month of February. Certainly, this is largely attributable to the Chinese New Year slowdown. However, there are other signs of slowing demand in China as central bankers are nervously trying to combat the rising inflation.
Of course, one should not take metals prices blindly. They cannot be foolproof indicators all the time. There are times when they go to extreme ends. Nonetheless, they can at times predict what humans cannot. Copper especially can be a better indicator than gold because of its early warning signals as compared to the latter.
