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Copper Prices and Their Relationship to the 10-Year Bond

Feb. 27, 2018
John Gross has spotted some correlation between copper prices and the 10-Year U.S. Treasury Bond.

Two weeks ago, all was well with the world. Prices had recovered from their precipitous fall from the prior week, with most looking to make, or at least test previous highs. However, last week saw some, but not all gains given back, as prices fell, ostensibly in response to the stronger dollar.

 So this got us thinking…  Of course that may seem to be an oxymoron, but yes, we really were thinking about it. Some analysts say the dollar rose in response to higher interest rates, while others think the Buck rose because of rising inflation.

 Whatever… When you look at a chart illustrating the connection between copper prices and the Euro, you can see  there is a broad relationship between the two. It's rough and not as consistent as one would like. So, in our ongoing, never ending pursuit of trying to understand factors that drive markets, we looked at a few other things, which brings us to the first chart in this week’s report – “Copper versus the Yield on 10-Year Bonds.”

It does not fit like a glove, but there is a relationship – that being higher prices associate with higher rates, and vice versa. Yes, it doesn’t sit well with conventional wisdom, but that’s just the way it is. And when you look at a chart illustrating the 2-Year Bond Versus S&P 500 an even closer fit exists between the two.  It’s too early to draw a conclusion, if one can be drawn at all, we will continue diligently working on it. In the meantime, we stand aside until the U.S. dollar reveals its next move.

You can't beat J.E. Gross & Co. for insight into copper's next move.  And if you would you like to learn more about how markets function, or how you can use technical analysis to gain an advantage in your purchasing or sales activities, or managing overall price risk, call or email John today at 631-824-6486 or [email protected]. He would be glad to discuss how you can put his company's market knowledge, skills, and experience to work for your organization tomorrow. 

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