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China Commodity Prices May Fall in H2: Yicai


Market Digest Hawkish BoK Minutes

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  • While gold has been considered as one of the major safe havens that tend to increase in periods of rising price volatility and uncertainty, copper is viewed by many investors as a leading indicator of global economic health (also called Dr. Copper).
  • The copper-gold ratio can therefore serve as an indicator of the global market's appetite for risky assets.
  • The chart below shows that the copper-gold ratio has strongly co-moved with the 10Y US Treasury yield over time, and that periods of moderate to significantly divergence were generally followed by rapid adjustments between the two times series.
  • However, the recent surge in copper prices (and the retracement in the 10Y yield) has led to a significant divergence between the two times series in the past few weeks (see chart below).
  • Is the 10Y yield too low, or is the copper-ratio too high (especially copper) at current levels?

Source: Bloomberg/MNI