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Keeping Copper in Focus

Copper Bars

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We've written about copper several times already in 2023, and it's time to do so again today as any breakout in price later this year is likely to have significant implications for the precious metals, particularly silver.

Let’s start with a recap. Here's a link to our most recent post that was written in late March. The links to the other copper-focused posts are embedded within:

In the 90 days since that post, not much has changed from a price standpoint. However, global copper stockpiles have continued to be depleted as economic growth continues and the move toward EVs and other devices accelerates.

The key chart to all of this details the available, above ground copper stockpiles. As you can see below—in a chart that needs to be updated—as of this time last year, global copper inventories were falling quickly.

Total Copper Inventories Chart

But don't just take my word for it. Here's Robert Friedland, the legendary founder of Ivanhoe Mines, discussing the looming copper shortages on Bloomberg television a few days ago:

Though the investment world is slowly waking up to this pending crisis, the reality of the physical metal supply/demand picture is not yet apparent in the futures market. As you can see below, the digital copper price has been in a steady downtrend of lower highs and lower lows for the entire first half of the year.

High Grade Copper Daily Candlestick Chart

But could that be about to change? Well, since we are talking about a commodity here, the first thing we need to check is the Dollar Index. A falling dollar is generally good for boosting fund inflows and prices in the commodity sector. At present, many analysts expect the dollar to remain firm as the Fed continues to hike interest rates in the United States. However, what if the index begins to break down instead? As you can see below, the index is trending toward another test of the 101 level as critical support. What if that level fails in the weeks to come? Could a falling dollar support higher copper prices?

U.S Dollar Index Daily Candlestick Chart

If the Dollar Index does indeed plunge below 100 in the weeks ahead, look for copper prices to move back above $4 and break out of the current downtrend. When this happens, the weekly chart reveals just how quickly price may begin moving to the upside.

High Grade Copper Weekly Nearest Candlestick Chart

And, finally, why does this matter to silver investors? Because, like copper, silver is also a vital industrial metal and electricity conductor. Additionally, global silver stockpiles are falling, too, as physical demand outstripped physical supply by nearly 240,000,000 ounces in 2023:

You can see the long-term correlation between copper and silver in the charts too. You might note that it appears that silver has a little catching up to do. (Copper in candlesticks, silver displayed as a blue line.)

Copper Vs. Silver Chart

So keep an eye on the copper price in the back half of this year. If it begins to break out, the impact on all metals, including silver, could be significant.

The more you know, the more wisely you invest.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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