Headlines give people plenty to worry about right now... Inflation's running at 3.4%. Gas prices are up 36% versus last year. And according to the Federal Reserve Bank of St. Louis, tariffs are adding close to 7% to the cost of everything bought outside this country.
'Dr. Copper' Says the Economy Looks Fine
By Joe Austin, senior analyst, Chaikin Analytics
Headlines give people plenty to worry about right now...
Inflation's running at 3.4%. Gas prices are up 36% versus last year. And according to the Federal Reserve Bank of St. Louis, tariffs are adding close to 7% to the cost of everything bought outside this country.
And that's not considering the new tariffs with Canada, our second-largest trading partner.
But things are looking up for "Dr. Copper"...
Just last week, the price of copper hit a new high. Futures jumped to nearly $6.85 a pound on the Comex exchange in New York and to $14,617 per metric ton ("mt") on the London Metal Exchange.
Investors call the copper trade "Dr. Copper" because it can be a good gauge of the economy's health since the metal goes into almost everything.
When copper prices climb, it usually means the economy is healthy.
And copper is climbing this year – smashing gold's gain. In fact, copper is up about 12% since January.
On the other hand, the price of gold – despite hitting a record high above $5,500 an ounce earlier this year – is down slightly for the year.
Personally, I prefer copper over gold since it has real uses. Demand for gold can turn on a dime... But the demand for copper is steady.
That's why copper's rise is so fascinating to watch right now. It's classic supply and demand at work.
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What Is Really Pushing Copper Prices Up?
Copper's strength today looks like a three-legged stool...
The first leg has to do with supply disruptions at major mines across the world.
Since last summer, natural disasters have struck some of the largest copper mines on the planet. There was a mudslide at the Grasberg mine in Indonesia and a flood at the Kamoa-Kakula mine in Congo. And an earthquake caused the Chilean El Teniente mine to collapse.
These disasters knocked each of these mines off line for a time... and left a real dent in global supply.
The second leg is driven by tariffs.
Buyers have rushed copper into the U.S., worried that new tariffs are coming. The Comex copper inventory has more than doubled in the past year. As of last week, it's sitting at more than 750,000 mt.
All that stockpiling has left less copper for everyone else. So buyers like China are paying up for what's left.
The third leg is continuous demand growth.
Electric vehicles are a big part of it. A gas-powered car uses about 50 pounds of copper. A fully electric one uses roughly 180 pounds, more than three times as much.
Then there are data centers.
Research firm Wood Mackenzie found that the copper needed to run a data center doesn't stop at the door. In fact, the copper used in the power lines, substations, and backup systems needed to power a data center can be more than triple the amount inside.
There are thousands of data centers currently running in the U.S. – and 1,000-plus are in the works.
Whether all those data centers get built or not is anyone's guess. But whatever gets built will need a lot of copper while supply is struggling to keep up.
You see, ore grades – the amount of copper packed into each ton of rock – are falling. So miners have to dig up more rock to get the same amount of metal.
And the permitting process for a new mine has gone from bad to worse.
A new copper mine takes about 18 years to go from discovery to production. Lawsuits and environmental fights can stretch that timeline even further.
Copper demand is expected to hit 42 million mt by 2040 – pushed up by AI, defense spending, and electrification. And earlier this year, S&P Global warned that copper supply could fall 10 million mt short of that demand.
That's a gap of nearly 24%.
Recycled copper supply has more than doubled to 10 million mt. While that helps, it won't be enough to close the gap.
So there are many reasons to be bullish on copper. And the Power Gauge agrees...
The Power Gauge Is 'Bullish' on Copper
I looked at three popular copper ETFs with ratings from the Power Gauge. And all three look similar.
The biggest is the Global X Copper Miners Fund (COPX), with nearly $8 billion in assets under management ("AUM"). Investors have sent its share price soaring 58% over the past year. Take a look...
Two other ETFs worth a look are the iShares Copper and Metals Mining Fund (ICOP), with about $500 million in AUM, and the Sprott Junior Copper Miners Fund (COPJ), with about $176 million in AUM.
Both of the Power Gauge charts for those ETFs look roughly the same as COPX's.
So while the economy might look shaky to some, copper's outlook is bright. It's based on a supply/demand gap that isn't going away anytime soon.
That's Dr. Copper's diagnosis in a nutshell: the patient is tougher than the headlines suggest.
Good investing,
Joe Austin Editor's note: In a special presentation, Joe joins our founder Marc Chaikin to discuss an exciting AI innovation from our firm. As they say, it could be critical to your success moving forward...
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— According to the Chaikin Power Bar, Large Cap stocks are more Bearish than Small Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Communication
+3.18%
Staples
+0.48%
Health Care
+0.37%
Energy
-0.37%
Financial
-0.47%
Discretionary
-1.00%
Real Estate
-1.78%
Information Technology
-1.91%
Industrials
-2.57%
Materials
-2.79%
Utilities
-3.75%
* * * *
Industry Focus
Mining
5
22
12
Over the past 6 months, the Mining subsector (XME) has underperformed the S&P 500 by 14.01%. Its Power Bar ratio which measures future potential is Weak, with more Bearish than Bullish stocks. It is currently ranked #14 of 21 subsectors and has moved down 2 slots over the past week.
Indicative Stocks
ALOY
REalloys Inc.
IE
Ivanhoe Electric Inc.
MP
MP Materials Corp.
* * * *
Top Movers
Gainers
CRWD
+13.85%
PANW
+13.09%
IT
+9.73%
COIN
+9.24%
FTNT
+9.04%
Losers
GLW
-13.70%
TER
-13.30%
COHR
-12.73%
HPE
-10.76%
SWKS
-10.29%
* * * *
Earnings report
Earnings Surprises
No significant Earnings Surprises in the Russel 3000.
* * * *
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