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).

Saturday, January 23, 2016

Gold vs copper

Below is the graph of gold and copper (gold and copper prices in US dollars multiplied by the US dollar index - representing the price that non-US-based companies receive for their products) over the past six years.

A tale of two commodities.

As said before, copper looks like an old man falling down the stairs. Just lately, the drop looks worse. I don't usually do simple technical analysis, but I'm not liking the looks of that breakdown. The last bounce of copper off the long trendline looks to correlate with the bubble in Chinese stocks, as if the faith in copper grew with the faith in the Chinese economy. The popping of the Chinese stock bubble may have been the signal for the copper bulls to give up the ghost.

Gold by contrast looks a lot better. Starting in late 2014, when the US dollar begin a rapid climb, gold x USDX has diverged favourably from copper x USDX. This looks like support for the argument of a major economic slowdown, marked by a move towards safety.

What happens next? I think much will depend on the US dollar. We will soon learn whether the US dollar really is a safe haven in tough economic times. If it begins to decline, I don't think we'll see a copper recovery--and the copper x USDX graph will get uglier still--but we should see a rise in gold. 

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