Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Tuesday, February 3, 2015

Differing trajectories of gold and copper

As discussed previously, the real economics of mining for non-US based companies needs to include not only the price of the commodity of interest, but also the value of the dollar. I have used the product of the US dollar index and the gold price (in US dollars) to try to assess the real impact on gold mining companies. As both of these components have been rising of late, we should see improvements in the bottom lines of well-run operating mines (poorly run mines may be a different story).

Today we try the same idea with copper. I managed to locate a fairly user-friendly site from which I obtained weekly closing prices of copper. The copper price has fallen quite substantially lately, but at the same time the US dollar has been rising. Do they cancel out?

I also have gold x USDX on the same graph for comparison. Gold x USDX has popped out of a fairly long trading range. Copper x USDX by contrast, resembles an old man slowly falling down the stairs. Until quite recently, it looked like the 2.5 level was an important low, but that has recently been broken. So if your copper mining companies haven't been doing all that impressively lately, this may be one explanation.

I can't say for sure what's behind it. It would be interesting to perhaps note QE decisions/PBOC pronouncements on the chart to see if there's a political angle. Maybe China is gradually transitioning from building way too many empty buildings to just building too many.

Incidentally, on the chart above, the gold x USDX has been scaled by a factor of 400. This means that where the two curves meet, the gold-copper ratio is 400. When the yellow line is higher (like now), that ratio is higher.

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