The steadiness of the economic recovery may be iffy, what with mounting layoffs and stubbornly high claims for jobless compensation. But two indicators are flashing green: the price increases in the bellwether industrial metals copper and silver.
Known as Dr. Copper, because it often renders a telling diagnosis of the economy, the metal has widespread applications, ranging from factory production to electrical transmission. This year, it is up 10.2%, besting the stock market’s key index, the S&P 500 (ahead 7.6%). And that’s after copper lost a quarter of its value in the March panic over the coronavirus’ onset.
The rebound stems from a pickup in US manufacturing, such as in automobiles, which had a two-month shutdown in the spring. China is another factor, as the economy there has sprung back, requiring a fresh influx of industrial materials.
Aiding the copper price bounce is low inventory, resulting from an earlier mining slowdown related to the pandemic, said Ed Egilinsky, Direxion’s head of alternatives. Also benefiting the metal are government stimulus actions around the globe, he added.
Silver has a dual use, both as a precious metal and as an industrial staple. Perhaps owing to that duality, it has performed even better then gold—which is up 26.3% this year, versus silver’s 40.6% climb. Gold is a classic haven investment. Right now, Egilinsky said, “there is a $20 floor for silver,” meaning the price seems determined to stay north of that mark. On Friday, the metal closed at $25.30 per ounce.
Like almost everything else, silver suffered in the March freak-out, losing a third of its value. Its comeback is a testament to its resilience and its appeal as a store of value, a la gold.
Regardless of which party wins the November election, a large infrastructure buildout seems very likely. That will be manna for industrial metals.