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Copper - the new Gold Standard?

Copper prices are at a 6 month high, so is this an indicator of economic recovery?  Analysts are not so sure.   China has been buying up copper at well beyond its current needs leading to speculation that the copper is going into long term stockpiles rather than to manufacturing.  This has led others to speculate that China is disenchanted with the dollar; so it is replacing the old “gold standard” with a new ”copper standard”.  Instead of buying US treasuries and dollar holdings, China is stocking up, at rock bottom prices, on a commodity that is essential for infrastructure and manufacturing industries.

Whatever the reason, is China’s purchasing of copper good or bad for US manufacturers?   Well, it could go either way.  China will certainly have an advantage once the recovery is underway since it bought its copper at the lowest price.  However the industry worldwide could benefit from the smoothing out of demand.  If copper production levels are being maintained this will help stabilize prices.  Once the demand returns this could help us avoid a bidding war pushing copper prices back up to last summer’s record levels.


Posted 04-29-2009 1:53 PM by Gerard Winstanley
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