Gross Domestic Product (GDP) is one of the most used measures to track the economy. And the forecasts for GDP this year are bearish. Most of the headlines suggest GDP growth is set to slow.
Well that may be so. But there is another roundabout way you can gauge economic growth. By tracking commodities.
Think of it this way…
If there’s a lot of construction going on, that needs a lot of raw materials. It follows then that increased demand should see those commodity prices rise.
Copper is one raw material you could follow. It’s used in most construction projects. As well as in many consumer goods.
Copper is also used in electric vehicles (EVs). EVs use a lot more copper than the old combustion engines. So it might also give you a feel for how EV’s are tracking.
There’s another thing that copper can show you…
It can give you insights into the world’s second largest economy. China is the world’s biggest consumer of copper. By a lot.
Anyway, let’s see what the copper chart might be telling us. Here’s the weekly…
Broadly speaking, the index is trading a range. In other words, the chart is not really giving us a definitive answer on anything.
But we can track it from here, and let the chart be our guide.
The index is finding support and resistance at certain levels. Watch now for a break either way. That just might tell you a few things about GDP, and a few other things.
Keep in mind though, the copper chart won’t tell you everything about GDP. Use it along with your other indicators. But it does give you something extra to help connect the dots, so to speak.
What we can say about the index is this: Since the low in September, the index has been putting in higher lows on the weekly chart. It might be too early to say, but copper may be a space to watch.
Copper Stocks on the ASX:
So, one could look at some copper stocks on the ASX. Sandfire Resources NL [ASX:SFR], could be one to bring up. They’re one of our major copper producers.
Here’s the weekly chart:
A bit like the copper index itself, it might be too early to make some sort of call on Sandfire.
What we can say about SFR is this…
The Sandfire share price has broken above an upper trend line, drawn across past tops. So on that note, perhaps it could go on the watchlist.
What now for the SFR Share Price?
We’ll see if the SFR share price holds recent support around the 5.80 level. Or, see if it brings in a higher low on the weekly chart. Something it hasn’t been able to do for almost a year.
At the end of next month, the company is set to report half yearly results. Should the share price start breaking above prior tops, that might suggest the copper price and revenues are improving. Let’s wait and see.
Remember, GDP forecasts are just that. A forecast.
Once you can read a chart though, you may come to find that oftentimes the charts can tell you a different story.
Just a space to watch.
So we’ll keep one eye on the copper index and Sandfire, as well. See if it might inform us on how the broader economy is tracking. And a few other things.
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