If iron ore serves as an early indicator for the Chinese economy, copper plays a similar role for Western economies.

According to Synergy Link Capital, copper has been in a 20-year upward trend, which may be driven by its increasing use as an essential industrial metal in most electronic devices. Therefore, copper is often considered an early indicator for Western economies. Weakness in copper prices often leads to reduced production and, consequently, weaker GDP.

Source: Synergy Link Capital

The chart above illustrates that copper price bottoms usually precede the bottoms in GDP for both the US and the EU. The correlation between copper prices and economic performance has made copper a valuable tool for predicting economic trends. The recent rise in copper futures after a period of accumulation is notable, pushing copper prices to the top of a long-term uptrend channel. However, this price increase might also be attributed to a short squeeze in the copper market due to low inventory levels, rather than optimistic economic prospects for the Western economies.

If iron ore serves as an early indicator for the Chinese economy, copper plays a similar role for Western economies. Monitoring copper prices can provide early signals about the health of industrial activity and economic growth in both the US and the EU.

According to Synergy Link Capital