In the year of COVID, what has moved copper! In January it plunged below its «true price» of $2.65 today per pound, its average over a century, and in April it was 17 percent lower. From that moment on, it experienced a dramatic recovery, which in December has raised it by a third above where the year began, higher than in its 2018 recovery, and 50 percent above its long-term average.
Well, in the year of COVID everything has gone up, after collapsing until April. Raw materials, bags developed, emerging and, from November, to the Chilean stock exchange and weight. Everything’s in the clouds. Compared to what developed markets have risen, copper has actually continued to correct the gigantic bubble, which during the first decade of the century had raised it six times above these.
In the year coVID has risen everything but the economy. It has suffered its worst fall since the 1930s, as all specialized agencies see.
But the dollar has also collapsed. He lost a third of his gold value and finished the year a fifth below East. It’s at its historical lows. Its unprecedented issuance has flooded financial markets, causing «asset inflation» that does not record the consumer price index. The devaluation of the dollar and other «strong» currencies is a major economic phenomenon, in the year coVID.
I mean, measured in gold, it’s actually all gone down in the year of COVID. About on par with the economy. The bag and the Chilean peso much more. Copper expressed in gold is worth the same as a year ago and is close to its historical lows, which it matched in May. Sounds reasonable.
How’s it going? There are two possibilities, which depend on the sima of the secular cycle begun with the century. Did developed economies hit rock bottom at the end of the first decade? Can COVID precipitate a new general fall, even lower than the presumptive sima of then? Let’s see.
In both cases, however, the outlook for the price of copper is very obscure for the decades to come. This has evolved in previous secular cycles over a century.
After each secular peak, developed economies and their financial markets fall to the bottom of their crisis phase. This extends no less than a decade and a half, and sometimes just over two. Overcoming the sima, they begin their long secular recovery until they surpass the preceding peak. Then they rise lushly until they reach their next peak. The entire period of each secular cycle lasts three and a half decades, little more, little less.
The «supercycle» of copper and other raw materials moves in sync with the secular cycle of developed economies, but exactly the other way around. It rises to twice its true price in phases of secular crisis and collapses to less than half of East during recoveries. Oscillating at every moment at the pace of developed markets and giving great tumbling, up and down.
All of this is due to profound economic causes. To which purely monetary phenomena overlap. The latter have been highlighted in the year of COVID. Precisely because of the latter, it is possible that the quote of copper in dollars will go up for a while, more or less on par with gold. As has been going on in the last two months.
In the decades to come and until the end of the ongoing secular cycle, and without prejudice to tumbos like the one it is going through these days, the price of copper will remain steadily below its secular average of $2.6 per pound today. And it can fall in the middle of it.
There’s no turning around to give him. No worse mistake than assuming «this time will be different.» The key variable to note today is the gold price.