On October 17, 1012, the Financial Times ran an article titled,
Copper prices to fall but not collapse
Here's an excerpt, try not to laugh:
"Most traders expect average (copper) prices next year
(referring to 2013) to be slightly lower as the uncertain
growth outlook combines with a rise in mine output. Traders
predicted average prices of $7,000-$8,000 a tonne, but said
copper would continue to outperform other metals. A senior copper
trader added: 'I think people are going to be surprised on the
What's happened since then?
LME Copper (cash buyer) was trading just shy of $8,200 when the FT
story ran. Now, copper is roughly 16% lower and at 18-month lows.
That's hardly anything close to the bullish expectations of
analysts or mining experts.
Since a picture is worth a thousand words, our accompanying
chart (see below) gives a good visual as to the type of damage
that's occurred in the copper market. Why does it matter?
Although the attention of the great commodities (NYSEARCA:GCC)
selloff of 2013 has been directed at declining gold (NYSEARCA:GLD)
and silver (NYSEARCA:SLV) prices, copper is arguably a more
important measure of global economic health.
As an industrial metal, it's used in everything from houses and
healthcare devices to tech gadgets. High copper prices are
reflective of high demand and a robust economy, whereas rapidly
falling copper prices, as we've seen over the past six months,
raise serious red flags. Although it may sound cheesy, Dr. Copper
is the only metal with a Ph.D.
Rightly so, copper prices are widely viewed as a bellwether for
Exchange-traded products (ETPs) linked to copper include the
iPath Pure Beta Copper ETN (NYSEARCA:CUPM).
The note was launched in April 2011 and uses copper futures
contracts with varying expiration dates to gain its market
exposure. CUPM has declined -11.18% YTD and is down -12.66% over
the past year. (
Trading Commission Free ETFs the Smart Way
The First Trust ISE Global Copper ETF (NYSEARCA:CU) contains
exposure to 27 stocks involved in copper mining. Among the top
three holdings are Xstrata, Southern Copper Corp. and Rio Tinto.
Currently, CU is in a bear market and hascollapsed -26.14% since
the beginning of the year.
One final copper related ETP is the iPath DJ-UBS Industrial
Metals ETN (NYSEARCA:HEVY). The note tracks five futures contracts
on industrial metals, four of which (aluminum, nickel, copper and
zinc) are traded on the London Metal Exchange and the other of
which (copper) is traded on the COMEX division of the New York
The May 2013 issue of the
ETF Profit Strategy Newsletter
examines the uncanny ability of copper to signal what's ahead for
stocks. In fact, there is one rare chart formation that strongly
suggests the onset of a 2008-like decline, a development that's
certainly supported by the number of indicators spanning a variety
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