Why Silver Investors Should Pay Close Attention To Copper

The relationship between gold and silver is well-known, but few investors realize the significant role copper plays in shaping silver's price movements. Copper and silver have a strong correlation, with a .725 correlation over the past five years and .878 over the past year. This correlation is due to factors influencing both supply and demand, including silver being a byproduct of copper mining and both metals having substantial industrial applications. Silver differs from gold in its demand profile, with 51% of demand coming from industrial use compared to 18% from investment. Copper and silver are more sensitive to the economic cycle than gold, with prices rising in anticipation of increased industrial demand and declining in anticipation of reduced demand. Trading algorithms also amplify the price relationship between silver and copper, creating a self-fulfilling prophecy. Copper's price movements have been closely followed by silver, even when gold has stayed flat or declined. The author suggests that monitoring copper closely can help investors understand silver's price movements and anticipate future trends. Copper's fundamentals point to a positive outlook, with increasing demand expected due to its role in AI and "green" technologies. As copper continues to rebound, both technical and fundamental factors suggest that silver is poised to benefit as well.