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June 25, 2012 at 08:37 AM
Part V in our series. Thanks to Troy Warwick for analyst coverage.
Industrial materials have always been useful tools in the prediction of economic prospects to come. Of these materials, copper is most notably reliable in indicating future market moves—in fact, some investors call the metal “Dr. Copper” because of its trend-predicting ability. Most of copper’s usage is put in place before industries are created, like in telephone wires and electrical equipment, which explains it use as a leading economic indicator.
The three main funds that track copper futures (CPER, CUPM and JJC) have dropped 15% in the last three months. Most investors see this drop in price as a result of lowered expectations of global economic growth. Worries over Greece’s New Democracy government and the continually shaky Spanish economy have been contributors as well. If the summit this week between European nations do not yield any real solutions in the euro debt crisis, copper will likely continue to drop.
