It’s Time to Watch Copper Again

We've had an eye trained on copper prices since late 2022. Why? Because any sustained move higher in copper is very likely to bleed over to silver, and with the COMEX silver price so close to a multi-year breakout, a copper catalyst could be all it takes to get things rolling.

Again, though, we've been watching copper for quite some time. There were moments in 2023 when it appeared that copper was set to rally...but it never did. And now here we are in 2024, looking for the same type of surge.

The copper price has moved higher lately, and as I type, it's back above $4/pound on the front month, May24 COMEX contract. See below:

From a technical standpoint, the chart looks pretty good too. Notice that the 50-day moving average is above the 200-day and that both are trending higher.

On the longer-term chart, you can see that a key level of resistance awaits if price can continue higher. Note that the area around $4.20 offered support a few years ago but has recently become resistance. As such, any move back above this level would be a very positive development.

And the fundamental supply/demand picture seems to be improving, too, with several major financial publications taking notice. Here are just a few recent links:

•             https://www.ft.com/content/c3c66359-6bdb-45cb-8ddd-663f10c1d3d9 

•             https://www.barrons.com/articles/ai-copper-stocks-nvidia-angloamerican-southern-copper-68d33f13 

•             https://www.bloomberg.com/news/articles/2024-03-21/copper-resumes-rally-as-fed-rate-signals-boost-industrial-metals 

•             https://www.bloomberg.com/news/articles/2024-03-20/china-copper-smelters-to-discuss-fees-as-crisis-roils-sector 

•              https://oilprice.com/Metals/Commodities/Is-a-Copper-Crisis-Coming-Prices-Hit-New-Highs-on-Smelter-Cuts.html 

Robert Friedland, legendary copper investor and founder of Ivanhoe Mines, is a great follow on X if you want to stay up to date on copper. Here's a sample of some of his latest posts:

Putting it all together, copper looks pretty attractive as both a trade and an investment in 2024 and beyond. However, that's not the theme of this week's post. Instead, check out the two charts below. Let's start with the past six months of COMEX copper and silver paired together with copper prices shown in candlesticks and silver as a blue line. As you can see, that's a pretty tight correlation:

But this correlation isn't anything new. Check out the last five years:

So, let’s have some fun and assume this correlation continues. If the mainstream financial media and copper analysts are correct and the copper price is set to new all-time highs at $5 or $6 per pound, how might silver respond? Would it be left behind at $25 or should we expect the HFT algos to maintain the correlation and drive silver past its breakout point? 

Let's take the correlation all the way back to 2009 and the advent of QE and debt monetization in the aftermath of the Great Financial Crisis. On the chart below, it certainly appears that silver has some catching up to do. How much further might silver rally if copper does indeed head to $6/pound in the months ahead?

Could the impending rally in copper be the spark that finally sets off a breakout in COMEX silver? Yes, it could. As you know, because we discuss it here almost every week, the price of COMEX gold has recently broken out to new all-time highs and the rush of new hedge fund and speculator cash has driven price close to $2300. 

But COMEX silver has yet to break out of its own range. However, a rally in copper could be all it takes to finally drag price up through $26 and $28, and once this happens, $34-36 and even higher prices await.

In summary, copper may hold the key to that elusive breakout in silver we've been waiting for. So keep an eye on it. Actually, don't worry about it. I'll keep an eye on it for you and will report back if and when it begins to break higher and—hopefully— take silver along for the ride.