One of my themes for 2012 focused on the price of copper:
From my 2012 Outlook-
Copper is an amazingly conductive metal, AND a fantastic gauge of the overall health of the global economy. From September 2011′s Economist:
“Copper’s excellent conduction of electricity and heat means that it is used not only to cable and pipe the globe. An average car contains over 25kg of copper; electronic gadgets, from PCs to mobile phones, use copper for wiring and contacts. Its ubiquity means that rising demand should provide an early indication of an uptick in manufacturing and construction. Copper sagged in the early stages of the credit crisis, for example, and then started to pick up at the end of 2008, some months before the stock market began to rebound.”
The price of copper has been steadily rising – but rising in an orderly fashion, indicating that the rise in copper (as well as other commodities) is coming from an increase in demand instead of short term price speculators.
In addition the price of gold has fallen during this time. To me, this signals that speculators are not too active in the commodity markets right now. Gold has been to choice commodity for “large scale” speculation over the past few years.
While energy has been helped by seasonal bias (see Rising Gas Prices — Frustrating to Consumers But A Boon for the ARTAIS Model), the aggregate rise in commodity prices seems to be demand based right now instead of trader based. However, investors will want to keep an eye on prices. If too much enthusiasm causes prices to spike, we may see an impact in consumer purchasing power – which will be bad for the global recovery.