Traders should look to monitor and profit from the inverse correlationship between copper ( JJC , quote ) and gold ( GLD , quote ). The red metal is mined almost entirely for industrial usage while the yellow metal is produced, in the great majority, for investment purposes.
As such, copper should rise in price when economies are strong and growing -- simply because there is greater demand.
Gold, by contrast, should rise when economies are weak, causing investors to lose confidence in fiat currencies and buy precious metals and other hard assets.
JJC peaked in August around $60 a share and is now under $45. GLD -- each unit of which represents 1/10 of an ounce of bullion -- was under $160 in August, peaked at over $180 in early September and is back under $160.
One thing that might drive gold is a new "rescue" in the European Union or United States.
The European Central Bank has begun inflating its balance sheet to finance rescue packages. And it would seem that a third round of quantitative easing might be initiated soon in the United States as "Operation Twist" is played out, according to an article by Machael Mackenzie in the Financial Times .
As detailed in articles on www.emergingmoney.com , gold is no longer trading in correlation with silver ( SLV , quote ) and platinum ( PPLT , quote ), as it does traditionally. While there has been a flight to safe haven assets, it has not included gold this round.
This will most likely change if and when the printing presses are set to "11" in both the United States and Europe.
As for copper, JJC has indeed rallied almost 6% for December.
JP Morgan and Morgan Stanley are bearish on the red metal for 2012, while Goldman Sachs is bullish. China is the biggest consumer of copper in the world at 38% of global demand, with the Europe is No. 2 at 17%.
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