By Ben Eisen and Stephanie Yang
The divergence in the price of gold and copper offer a “really bullish” signal for the broader market, said Jodie Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices.
Copper and gold typically have little correlation with each other. But that’s changed in recent days as the relationship has turned sharply negative. The 20-day rolling correlation between continuous front-month contracts of copper and gold dropped to as low as minus-0.91 at the end of last month, its lowest since 2011. It pared back to minus-0.83 on Tuesday, according to WSJ Market Data Group.
The price action of both metals goes along with investor bets that President-elect Donald Trump will help drive up economic growth and inflation as he enacts policies like infrastructure spending and tax cuts. Such speculation has also driven domestic stocks higher, while leading to a sharp selloff in bonds.
Some have flagged the market moves, particularly the copper rally, as being long in the tooth, suggesting investors have gotten too bullish.
“It does not appear wise to chase the copper market right here,” said John Kosar, chief market strategist at Asbury Research LLC, in a Tuesday research note.
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