Will the Decrease in Copper Prices Result in an Economic Downturn?

Commodity traders often use copper as an indicator of the global economy due to its sensitivity to economic trends. With copper prices experiencing a more than 10% drop in the past six weeks, the economy is expected to slow down. The cause of the drop in copper prices is due to oversupply and decreased demand. China, which utilizes half of the world’s supply, has been contributing to the oversupply due to their rapid development in infrastructure and real estate. With interest rates rising globally, demand has become sluggish. This is reflected in the increase of copper reserves and inflows for 23 consecutive days.

Despite the current condition of the copper market, there is still potential for growth, especially in the long term. The United States is starting to improve their electric grid as electrification increases and renewable energy sources gain more market share. India may also see an increase in investment into their infrastructure by their government. As a result, copper’s long-term prognosis may improve.

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