Copper, long viewed as a dependable economic barometer, is approaching unprecedented levels.
Experienced cryptocurrency traders may remember times when bitcoin (BTC) and copper showed a significant positive correlation, which might lead them to view the current surge in copper prices as a bullish sign. Furthermore, BTC’s most prosperous years have often coincided with a rise in the copper-gold ratio, which is currently on the upswing.
Yet, the recent increase in copper prices is influenced by factors unrelated to optimistic signals from the global economy, prompting some caution in interpreting this as a bullish sign for risk assets, including BTC.
As per analysis by ING, copper’s year-to-date surge of 12% to $5.10 per pound on COMEX is largely attributed to President Donald Trump’s trade tariffs, which pose potential risks to both the U.S. and global markets. These policy actions likely compelled the Federal Reserve to revise growth forecasts downward while elevating inflation expectations this week.
In essence, the rise in copper prices is chiefly influenced by Trump’s trade tariffs, which threaten economic stability.
“Copper’s up about 12% this year, primarily due to uncertainties surrounding Trump’s trade policies. Developments related to tariffs are expected to continue influencing prices in the coming months,” noted analysts at ING in a client report dated March 18.
The not-so-optimistic nature of the current copper rally can also be attributed to stagnant trading in the Australian dollar-U.S. dollar exchange rate.
Australia ranks as the world’s 7th largest copper producer and the 3rd largest copper exporter. Historically, the AUD and copper prices have maintained a correlation coefficient exceeding 0.80. However, that correlation appears to have weakened this time, likely influenced by the tariff-induced spike in copper prices.
Don’t overlook China’s recent stimulus measures
Additional elements driving the copper rally, such as the latest stimulus from China, could positively impact bitcoin and overall risk appetite. As the largest importer of commodities, China plays a pivotal role in global markets.
Just earlier this week, Beijing unveiled its most ambitious plan in decades aimed at boosting domestic consumption amid external challenges stemming from Trump’s tariffs. The initiative emphasizes a direct connection between consumption, accessible childcare, and the longstanding property crisis in the country.
“The policy framework includes measures to raise household incomes, stimulate spending, and encourage population growth. New data released for the first two months of the year indicates that Chinese consumption, investment, and industrial production have all outperformed expectations,” ING analysts remarked, clarifying the recent rise in copper prices.