Dr. Copper Breaks Out

"The meek shall inherit the earth, but not all its mineral rights." - J. Paul Getty

The world runs on oil, but copper points directly to global growth.  In the commodity world the metal is referred to as Dr. Copper as it is a wonderful indicator of global growth.  As there is plenty of copper available the price is very sensitive to changes in demand.  More demand pushes the price up and less demand results in lower prices.  As such the price is very elastic or sensitive to changes in demand for the product.

Copper is used throughout the world and is a base metal.  Think about it, copper is used in pretty much everything from cars to building to electronics and infrastructure.  As it is in most every manufactured product sold throughout the world plus in all building and infrastructure projects, increased demand for copper points to global growth.  So when Dr. Copper breaks out to the upside I take notice.

Following is a chart of the copper prices since October 2011 and as you can see the price has been in a relatively steady uptrend.  It appears with the most recent breakout that global demand for the commodity is growing pointing to global growth.  Once again thought this comes with a caveat - demand for copper can spike as governments such as China stock pile the commodity in anticipation of future growth.  There have been times when this growth has not materialized and the price collapses pretty quickly.  However this chart seems to point to some sustained growth and unless Greece and Europe spoil the party it does appear that global growth is on an uptrend.

If the housing market would start to recover I really believe that we may have a sustainable rally but until such time I am hesitant to become too bullish particularly when it is based on such a volatile commodity as copper.  Furthermore as you will see in my blog on housing next week we have a long way to go before we can call any kind of a recovery sustainable and this breakout could (as with any chart analysis) be a head fake.