Copper is a cyclically sensitive metal that was given the moniker of Dr. Copper, because it is said to have a Ph.D. in economics because of its ability to forecast global economic trends. Its recent breakout from a 10-month base excited a lot of people. Similarly, the turnaround in the relative performance of materials stocks was interpreted as a cyclical green shoot.
On the other hand, the sideways pattern of the copper/gold ratio gave a different message of economic stagnation. Both copper and gold are metals with inflation hedge properties, but copper is more cyclically sensitive. The copper/gold ratio acts as a cyclical indicator to filter out the inflation sensitivity of changes in metal prices.
Therein lies the mystery. Are the markets signaling a cyclical rebound, or not?
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