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Copper Gold Ratio Predicts Higher Stock Prices at Trader’s Narrative





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Since we’ve had movement in both the price of copper (up) and gold (down) I thought we’d check into the copper/gold ratio. The reason I’m interested in the price of copper in gold is that it has been an uncanny predictor of the S&P 500 recently:

copper gold ratio Aug 2010

The copper gold ratio was predicting lower prices for the S&P 500 index back in June.

Back then, the ratio fell below the lows it made in October 2009, November 2009 and February 2010. Soon stock prices followed.

Now, the ratio has made a bottom (in early June) and surpassed its previous lows (blue line). That would suggest that the early July lows in the S&P 500 will hold - assuming that this relationship between the commodities ratio and stock prices continues, of course.

As well, the firm prices in Dr. Copper are suggesting that a “double dip” is a receding scenario. This confirms other data that I’ve looked at and shared over the past little while:

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4 Responses to “Copper Gold Ratio Predicts Higher Stock Prices”  

  1. 1 Andrew

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    The conventional wisdom is that when copper prices go up, you see a recovery in stocks or an increase in stocks. However, conventional wisdom is what got us into the mess we’re in.

    I stay out of the stock market and listen to Jim Rogers.

    Indeed copper prices are going up, iike most metals, so get some pre-1984 pennies.

  2. 2 LikeAGentleman

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    This is the most rediculous idea that I’ve ever read. You have retrospectively found a ratio of 2 variables that seem to correlate with the S&P 500 over an 18 month period. Anyone with time and a computer could probably find thousands of ratios that also mimick the SNP over these 18 months. This correlation you’ve notice (looking through the rear-veiw mirror) is based on nothing but randomness. Similarly, if the ratio of temperature in Australia over the price of coffee in Kentucky was shown over 18 months to be predictive of the SNP, it would also be purely random. Anyone who gives your idea more than 2 seconds of thought and a chuckle is a fool.

  3. 3 Humphry

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    If you look back in history ( 300 year) you will find that the Gold/Silver ratio is a very good predictor of credit problems and as we know credit problems tend to be deflationary i.e. stocks down. I imagine that the gold/silver ratio behaves very much like the gold/copper ratio as gold is mostly a money and copper and silver are mostly commodities.

  4. 4 don

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    pennies chaged from copper to zinc in 1982. To be sure you have pure copper pennies, make sure they are 1981 or earlier.

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