Copper and the Economy
One could try and track the consumer price index, the employment rates or follow the G8 GDP numbers. But an easier route to determining the state of the economy may simply be to follow the price of copper.
Copper is a straightforward, notable gauge - like a crystal ball, the upward or downward trend of the price of copper may give you a clear view to how the international economy is fairing. Simply put, when the price of copper is buoyant, the global economy is doing well. Why? The reason for this is straightforward. Copper is durable, strong and an excellent conductor of heat and electricity - as a result it is widely used in everything from automobiles to construction products to electronic equipment. When the global economy is doing well and is on an upswing, demand for copper generally increases and the price of copper will follow suit.
This is most recently demonstrated by the activities in China. China is, and has been, one of the largest users of copper. The country has developed a sudden appetite for copper and has been taking advantage of relatively low prices to stockpile the commodity. These stockpiling efforts are a signal to a rebound in industrial output and coincide with a recent climb in copper prices.
Historically, copper has tended to be a lead market indicator and the price has tended to rise at the end of major global economic downturns. Market analysts see the current rise in the price of copper as a reflection of the optimism about the state of the global economy.
Investors looking to invest in a rising copper market but are unsure of how to go about this - or don't want to trade global future contracts - have an alternative. They can invest in public companies focused on copper.