In the midst of the Chinese economic collapse, there’s an unexpected hero emerging – copper. It’s like a plot twist that most investors couldn’t have fathomed a few years ago. So, why is copper shrugging off the economic chaos in China, you ask? Well, let’s break it down.
Firstly, the G-7 economies are flexing their manufacturing muscles, creating a rising demand for copper. They’re on a mission to rebuild, countering the effects of China’s market decline.
Secondly, there’s a Green Revolution in its early stages, and copper is playing a crucial role in this environmentally conscious movement.
And if that’s not enough, welcome to the era of inflation, where buyers are flocking to natural resources and related assets. Copper seems to be basking in this newfound attention.
This trend echoes the resilience we saw in gold during the past 1-2 years when the fixed income market was in disarray – a classic move during inflationary periods.
But here’s the kicker – despite the ongoing downturn in the Chinese economy, commodities are experiencing more of a consolidation period than a meltdown over the last 18 months. It’s like the calm before the storm, as Chinese authorities are gearing up to implement stimulative policies to prop up their market.
Keep an eye on the numbers – the PBOC balance sheet assets have surged by nearly $600 billion in the last 4 months. And hey, the situation in the Suez/Red Sea? It’s not getting better; in fact, it’s worsening!
As we head into spring, brace yourselves for goods inflation on the horizon. The winds of change are blowing, and copper seems to be dancing to its own beat amidst the economic whirlwind.
Sources:
Here is the same chart versus a equal weighted commodities index.
Similar divergence. pic.twitter.com/EcbT7werk5
— Otavio (Tavi) Costa (@TaviCosta) January 21, 2024
The situation in the Suez / Red Sea is WORSENING not improving!
Goods inflation upcoming during the spring with an increasing likelyhood.
Full story -> t.co/NrDxt0x2Ap pic.twitter.com/bNtpzZ9zBv
— AndreasStenoLarsen (@AndreasSteno) January 21, 2024