Copper Futures Prices May Be Predicting a Major Economic Recovery

The copper market has been called the only commodity with a PhD. in economics because of its habit of rallying before global economic growth occurs and selling off before global economic growth begins to slow. The recent rally in copper futures prices may be predictive of a possible economic recovery soon.

Many parts of the global economy seem to be looking better. China, India and Brazil continue to grow rapidly and in doing so are consuming massive amounts of copper for infrastructure and housing needs. The recent problems in the European Union seem to have subsided and may lead to European economic growth over the near term. The London Metals Exchange and the Shanghai Exchange are showing declines in supplies which may be because of the growth patterns in Asia and South America.

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The collapse in the financial markets in 2008 caused many central banks around the world to print massive amounts of currency to keep the investment markets liquid during the crisis. This supply of money that was injected into the banking system will eventually be lent out to small businesses and individuals. Once the money supply comes into circulation a massive inflationary cycle may begin. During inflationary times industrial metals like copper and aluminum and precious metals like gold and silver tend to increase in price as it takes more Dollars, Euros, Yen etc. to buy those same commodities because those currencies become worth less and less.

A recent report from the International Copper Study Group suggested that the world copper market had a 60,000 ton deficit in the month of April. In a time when the global economy has been struggling, the copper market has managed to remain in a bullish supply and demand posture. Copper futures prices may also see an even bigger rally than it has already once the global economy does begin to improve. Copper futures prices can potentially set all time highs before this current market trend for higher prices ends.

Copper Futures Prices May Be Predicting a Major Economic Recovery

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Futures, options and foreign exchange products carry significant risk of loss. Past performance is not indicative of future results.

The author of this article is a 17 year veteran of the copper futures and options markets and is the President of T & K Futures and Options, Inc.

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