As a macro economic indicator, the Cu/Au ratio (CGR) is attempting to bust bullish. But with other cyclical items like Palladium, Oil, Lumber, etc. in the dumps it’s a story of Doctor Copper’s supply/demand situation rather than Doc’s prescription for the wider global economy.
Again, at some point we might expect the next inflation phase – if applicable – to be of the fiscal variety (created by politicians via debt spending) in order to rebuild war torn regions, as opposed to the 2020 inflation, which was of the monetary variety (created by central banks via outright printing). But it remains to be seen why copper might (or might not) be getting such a head start on such a play.
Being an indicator nerd and currently still on a disinflationary plan, I probably have not given copper the consideration it deserved with respect to its discrete warehouse levels and supply/demand fundamentals. Regardless, as an indicator the CGR is busting back up toward the extended topping cluster we observed all through 2021 before it finally broke down. Weekly chart below.
It could be the ending move and last gasp of the cyclical inflation phase. Markets do so often push extremes, after all. But a breakthrough here would put a spanner in the works of the counter-cyclical view, even considering copper’s discrete supply/demand situation. However, the red horizontal line is there for a reason and that reason is that the ratio could also be approaching a termination point. It’ll be interesting, one way or the other.
We have been noting that nominal copper (daily chart) is still well on its intermediate bullish trend and this morning, amid other markets that are negative, the copper price is bumping upward after holding the 50 day moving average. It too is aiming for a resistance zone and it too could simply be pushing extremes. But a breakthrough could mean copper is getting a jump on the next cycle. Again, interesting and worthy of watching closely.
“….I probably have not given copper the consideration it deserved with respect to its discrete warehouse levels and supply/demand fundamentals….. ”
The implication here seems to be that by some sort of fundamental research you might have been able to determine the global supply-demand dynamics of copper (or any other commodity) in advance of this latest move in order to make a profit.
I submit that this is a hopeless undertaking. Such information will be carefuly concealed by those making the real money in any of these fake “markets”: the megabanks, Blackrock & Co and their machines. The individual investor is the sucker, every time.
So one is left to comtemplate the massive fluctuations and small squiggles in charts like the above, and decide that one might just as well play the slots in Las Vegas.
As you know, I am suspect of the real demand aspects of copper. But are you questioning the warehouse supply data? As a former manufacturing guy (we did not use copper very much, but the concept is the same) I am well are that prices in metals are the product of both sides of the equation, supply and demand. Warehouse supply is, for whatever reason, low.