What the Copper Market is NOT Pricing In

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What the Copper Market is NOT Pricing In

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Copper is known as Dr.Copper, as it is used to gauge the health of the world economy, and whether the world is slowing down.

Copper is used for infrastructure and other building projects, and the big copper boom we saw was from China’s insatiable demand while they went to modernize their cities and infrastructure…not to mention the fake empty cities. The hope has been that other emerging markets would continue this demand as they implement their modern infrastructure projects.

Governments do tend to implement these projects on a large scale whenever there is an economic slowdown in order to employ and spur some growth (Keynesian aggregate demand theory).

So it is natural that now, the chart of copper is really moving due to the US-China trade war as China is still considered to have a large demand for copper.

Some say the Chinese are loading up on these depressed prices through future contracts and this will eventually lead to a supply glut.

I want to direct your attention to the Copper chart posted above.  It seemed like we were going to make a weekly chart head and shoulders pattern with a break below the 2.50 level which would be bearish Copper.

The trigger would be the continuation of the stalemate between the US and China…but more importantly, the fact that PMI data is showing the world is slowing down.

Remember, a recession is lagging since it needs 2 consecutive quarters of decline meaning that we have already been in a recession for 6 months when a recession is officially announced! We could very well be in a recession currently, the media using the trade war as the cause of this.

So Dr. Copper does seem suppressed over the potential of a recession coming. The trade war will likely continue for along time, which is something I have written a lot about. If a deal is reached it would be more of a truce just for pictures for President Trump and President Xi to sell domestically as a win.

I am intrigued about what I am seeing on Copper technically. That is a potential break of the 2.70 zone. Again, this could happen in a few weeks with a trade war “truce”. This could cause a technical move to 3.00.

 

Now geopolitics aside, there is one other reason that Copper will do well in the future, and what I believe is not being ‘priced in’ the Copper charts.

If you follow my work, you know that I have been saying that central banks are stuck. They have no options other to cut rates to 0 and even negative. 

Digital money will be introduced as a way to track money, but more importantly to tax all transactions (private jobs, selling on craigslist, tips at restaurants etc).

Big government is coming because it is required to keep the system going. 

If we go down the MMT path, then taxes will have to increase. The socialist economists know that giving people more money without increasing productivity will just lead to increasing prices and nullify any potential gains that was supposed to aid the people through MMT.

Taxation has to increase in order to remove and destroy the excess money. Government essentially acts like the central bank.

Now, take some time to consider the world we live in. How can government sell more taxes when people are already taxed to the max and are taking out more debt to just survive?

The Green movement.

I have been mentioning this on my social media stories for sometime, but this is the best way for government to increase taxes on the people, and the people will not argue paying it. At time of writing, you are seeing the green movement increase even more with Greta Thunberg calling for government to do something about the impending climate doom.

When government introduces taxes for a green infrastructure project, people will not complain for fear of being labelled a climate change/global warming denier, and to not appear politically correct or trendy given the way the media has portrayed the green movement with Greta.

Now of course this could backfire. In France, Macron wanted to get away from Nuclear energy (which accounts for 75% of France’s energy…and get this: is the cleanest form of energy right now) in order to implement more ‘green’ energy. It would be paid by a tax on gasoline. The people of France did not like this and you are seeing the yellow vest movement. France has a history and cultural identity of expressing displeasure with their government.

In Canada, the Trudeau government introduced carbon taxes for gasoline and used the money to fund pipelines. The people here do not care because they want to maintain the cultural identity of Canada being ‘chill, carefree’. 

However, to be completely honest, the movement and trend Greta Thunberg has caused will do a lot of quash this anger. For fear of not being politically correct, liberal or trendy.

Now to copper. Basically to summarize this entire blog post: Copper IS the GREEN ENERGY metal. It is required for everything from infrastructure, to solar panels to wind turbines to even lithium batteries.

If government does commence a large green infrastructure program to keep the economy chugging along, we will need a lot of copper.

This is something I do not think people are accounting for, but I believe is coming with the bigger government predicament we are facing.

Another bullish copper project has to do with the medical infrastructure.

Copper is known to kill 99.9999% of bacteria on contact. This has caused many health crazes like copper water jugs and other such things.

Hospitals in the Middle East are now beginning to have copper made door knobs and replacing all the metals on bed and stretcher handles with copper. 

It is known that many deaths in hospitals actually occur due to bacteria and generally dirty hospital conditions. 

Copper would greatly improve the environments in hospitals and could very well save costs of hiring people to clean hospital apparatus’.

So in summary, copper is linked to the world economy and to China. The US-China trade war is dictating the price of copper currently, but I believe there are many other bullish copper price catalysts that have not been priced in yet for the long term.

 

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Vishal Toora

Vishal Toora

Vishal is an avid market analyst, geopolitical junky and wealth management strategist. As the founder of UnchartedFX, Vishal has over 7 years of live market experience with real money accounts. Originally an archaeologist by career, Vishal decided to pursue trading full-time in 2014 because of the freedom and financial stability awarded from the worlds financial markets successfully.

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