The recent run-up in the price of copper is predicting that we will soon have a U.S.-China trade deal. Does that sound crazy? Maybe not.
Continue Reading Below
Copper is also known as “Dr. Copper,” because of its amazing ability to predict not only the health of the global economy, but also major turning points that may lie ahead.
Yet in recent years instead of measuring the health of the global economy, Dr. Copper really seems to be more of a specialist on the Chinese economy. That is because not only is China the world’s largest consumer of the red metal, but it has also accounted for most of the growth in demand.
From 2008 to 2017, global copper usage increased by 33 percent, an incredible 28 million metric tons, according to the International Copper Study Group. That is a lot of pennies.
China accounted for 6 million metric tons of that growth during that time period, and now accounts for 50 percent of global copper demand. For that very reason the price of copper really was mainly influenced by the health -- or the perceived health -- of the Chinese economy.
So, with the onset of the U.S.-Chinese trade war, the price of copper hit hard times. Dr. Copper looked like it was giving the Chinese economy a terminal diagnosis causing the red metal to crash over 20 percent after President Trump threatened to slap tariffs on virtually all Chinese imports into the U.S.
Yet suddenly, Dr. Copper is showing some life. Not only have prices rebounded sharply, analysts from Citigroup and Goldman Sachs expect the rise to continue. Citigroup, for example, says it expects copper to add another 10 percent to the upside from current levels over the next three to six months on expectations of a U.S. trade deal with China and increasing confidence in a global economic recovery.
If that is true, then maybe Dr. Copper is also predicting that the U.S. is on the verge of winning the trade war with China, which of course would provide historic benefits for the U.S., China and the global economy.
Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report.