It is often said that "copper is the metal with a PhD in economics". Because copper is used so extensively in our high tech civilization, it's price movements are very sensitive to the pace of the world economy. Copper is used for almost all electrical wiring and circuit boards, in plumbing, in coins, and in creating many metal alloys. When the economy is booming, the need for copper soars, sending prices up, and when recession strikes, demand falls off, and prices slump. The volatile dollar can sometimes obscure these price signals, so the best way to see what Dr. Copper is telling us is by looking at the price of copper in a more constant money, gold.
As the charts below show, copper is near its all time lows, about the same price in 2010 as in 1936. But because of the ongoing destruction of the US Dollar, it requires 35 times as many dollars in 2010 to buy a pound of copper as it did in 1936!
Copper in gold grams per tonne from January 2011 to present:
click on the chart to download a pdf
Copper in gold grams per tonne from January 1990 to present:
click on the chart to download a pdf
Pings on Copper
Comments on Copper
… so it seems to indicate we've been in a pretty big economic slump since the 1970's? Seems like there's been a lot of building since then… So maybe copper production has just kept up a lot better since then.
Curtis, I think you got fooled by the fact that the chart compares the price of copper to the price of gold, and not in dollars. It's not so much that the price of copper plummeted in 1970 so much as the price of gold, which had been kept fixed for almost 40 years, was finally allowed to float — and subsequently rose substantially. That event allowed the two metals to get back into balance. The period of roughly 1945 to 1975 represents the real anomaly, where the price of copper was allowed to rise, but gold wasn't.
@Frank: With reference to Frank's comment, does this invalidate all the statistics published for the period between the 1940s and the 1970s?
@Frank: The whole point of this chart (and this site) is to eliminate the distortion caused by fiat currency manipulations — so the TRUE price of copper DID plummet after 1970. Even though USD was pegged, the difference leading up to the 70's was how easy it was to defend the peg while the US was a CREDITOR nation with a trade SURPLUS. Just because the price of gold was consistent around $35/ounce, doesn't change the fact that other goods and services were being bought and sold using the USD to transact.
Gold traders in the 40s and 50s simply knew that it wasn't worth challenging the US government because it had the means to defend its peg. That changed when the Eurodollar market turned into a virtual casino (an unintended consequence of the Bretton Woods System), and capital left the US for better risk-adjusted returns in Europe.
As long as there was confidence in the Dollar, the "official price" of gold was defensible and didn't require selling Bretton Woods member governments' gold holdings into the market.
I think the main thing that caused the price of copper to go down was that the plumbing industry started using plastic pipes. Somewhere along in there the US mint also stopped using pure copper in pennies. For sure, when there's a big spike like 1970, industries have a great incentive to try to substitute other materials. The earlier spike in the 1950s was about the time that builders (temporarily) substituted aluminum for copper in house wiring.
Are these copper charts the closest proxy to iron ore priced in gold? What peaked my interest is that there are a few stories around this week about the collapse of iron ore prices in USD.
@PRice: I don't think copper and iron ore trade on the same fundamentals, so I would be wary of using copper as a proxy. I have added a monthly chart for iron ore, based on China import Iron Ore Fines from http://www.indexmundi.com/commodities/?commodity=iron-ore. Enjoy!
Thanks, that makes sense.
Is there any coincidence in copper being a major source of foreign exchange for Chile, Salvador Allende coming to power in Chile in 1970, and Richard Nixon's administration not liking this new government and its desire to nationalise the US controlled copper mines?
Copper in gold grams per tonne from January 1980 to present
This is a broken link.
Thank you for this terrific data source.
Thanks for pointing that out, Larry! That chart was lost a while back in a computer crash, but was replaced by a chart from 1990 to present. The link didn't get updated. I'll fix it straight away! Thanks again.