Copper to Gold Ratio

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Interpretation

Gold is the most widely recognized safe-haven asset among investors. Therefore, during times of economic and geopolitical distress it generally tends to perform well, making it a leading indicator of fear.
Copper is the exact opposite. Because it is a key industrial metal that is used globally in a wide range of industrial applications, it performs strongly when the global economy is firing on all cylinders. This makes it a leading indicator of global economic health and has led to it being commonly called Dr Copper.
The ratio prices copper in gold and represents the number of ounces of gold it takes to buy an ounce of copper.

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Gold vs. Copper

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Interpretation

A long-term price chart of the two reveals two things: First, Gold and Copper tend to move in the same direction a majority of the time. Second, it shows that the copper market tends to be more volatile and sensitive to price swings than gold. It makes sense that copper reacts to fundamental trends more quickly than gold. Copper is used explicitly for industrial consumption. More than two-thirds of the world’s red metal goes directly into building construction and electronics. The value of gold is much more likely to be shaped by interest rates and inflation expectations (rather than by noticeable swings in actual production and consumption) because most of of the gold in the world simply gets stored and transferred back and forth from one vault to the next.

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Copper to Gold Ratio vs. Interest Rates

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Interpretation

Interestingly, the Copper to Gold Ratio correlates strongly with the 10-year US Treasury Bond Yield and is often mentioned as a leading indicator for interest rates.

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