Dr. Copper Gives a Lecture, Or Does He?

The term Doctor Copper is market slang describing the base metal as possessing Ph.D. in economics. It gets the prefix "Doctor" because of its ability to predict turning points in the global economy. Copper, aside from oil, is probably the most important commodity for any modern-day economy. Copper's widespread application throughout the economy gives it a unique characteristic and sensitivity to economic activity.

Since it takes a decade or longer to bring a copper mine online, the supply of copper is relatively inelastic. This means the supply is relatively fixed. As a result, when the economy expands, the demand for copper rises, causing its price to rise. When the economy contracts into recession or its rate of growth slow down, the price of copper falls.

It is this price action that gives a clear market-based signal about the health of the economy. Investors look to the price of copper most often when they believe the economy is at an inflection point. If the price of copper is holding up or rising, investors infer that demand is strong and conclude economic life is ok. If the price of copper is falling some might conclude that a recession is around the corner or even in progress. In either case, they act and invest accordingly,

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