15.04.2021
Copper - the pause that refreshes
After a huge rally over 2020, Copper has paused for breath over the last few months.
Critically though, macro fair value has not deteriorated. Model confidence remains high & tracking GDP growth for US, China, Europe & Japan remain the dominant drivers. Dr Copper retains its role as a bellwether for the global economic cycle.
Critically though, macro fair value has not deteriorated. Model confidence remains high & tracking GDP growth for US, China, Europe & Japan remain the dominant drivers. Dr Copper retains its role as a bellwether for the global economic cycle.
From a macro perspective, that period of consolidation never saw a deterioration in fair value. Qi’s model value (red line) tracked sideways. The fall in spot price (white) took it to 0.5 sigma (6%) cheap to macro at the start of this month.
Now, after a bullish report from a US bulge bracket Investment Bank yesterday, spot is starting to rally once again.
Still, for believers in a copper super cycle, the metal still trades cheap to macro-warranted model value. 0.3 sigma is 3.4% below model.
Aside from green / EV dynamics, Dr Copper remains a global growth play. Global GDP growth accounts for nearly a third of model explanatory power. A model which has 90% confidence currently.
Now, after a bullish report from a US bulge bracket Investment Bank yesterday, spot is starting to rally once again.
Still, for believers in a copper super cycle, the metal still trades cheap to macro-warranted model value. 0.3 sigma is 3.4% below model.
Aside from green / EV dynamics, Dr Copper remains a global growth play. Global GDP growth accounts for nearly a third of model explanatory power. A model which has 90% confidence currently.
