If there are expectations of a V-shaped recovery from the coronavirus-led downturn, someone forgot to tell commodity markets. The market cap of iron ore giants BHP and Rio Tinto is down around $10 billion since January 22. A similar message from copper, whose record as a boom-bust indicator has earned it the “Dr. Copper” moniker. Comparing its price against gold can point where growth is headed; very simply, if you think the economy’s tanking, you dump copper and buy gold. So, gold has risen against copper before every previous growth scare. That gold/copper ratio is currently near four-year highs. And across China, consumer of half the global copper supply, the metal is piling up in warehouses.
Brent crude, another growth barometer, also languishes 15% below January peaks, despite a supply cut by oil producers and suggestions of more reductions ahead. Producers’ group OPEC reckons 2020 crude demand will be 200,000 barrels per day below previous forecasts, and industry body IEA expects oil demand in the first quarter to fall for the first time in 10 years.
So who is right: gloomy Dr Copper or world stocks which are back near record highs? Coming days may tell.