Last week, my Supercycle Investor subscribers took six rounds of gold gains — 63.8%, 31.9%, 19.2%, 17%, 14.9% and 3.5% — and they are getting locked and loaded for more. Get in before the metals, and the positions that are best-leveraged to it, continue their march higher. Click here to see how.
I’ve also touched on other shiny opportunities in metals like the industrious palladium, that look ready to rocket up … and take your portfolio with them.
At this point, you might be wondering if there are any other metals worth writing home about. So, today, we’ll look at copper.
Copper Rangebound for a Year
Unlike gold, which is up 16% in the past year, copper has gone virtually nowhere.
Why? Well, a major reason is the ongoing trade tiff between the U.S. and China. Since we are a major market for Chinese goods, the enduring treaty squabble and tariff slap-fest makes investors worry that China’s economy will slow down … and, with it, China’s demand for copper. That country uses about half the world’s copper supply. The U.S., on the other hand, uses about 10% of world supply.
And there is good reason to worry. China’s industrial output recently slid to a 17-year low. Output growth fell to 5% in May. It bounced to 6.3% in June, But that’s still far below the official target.
Meanwhile, China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years. That may put Beijing’s annual growth target of 6.5% out of reach.
To be sure, China’s not taking this lying down. The government there is rolling out one stimulus measure after another to prop up the economy. That’s what the bulls are looking at. They say that Chinese growth will recover and gain momentum. Then, look out!
And the bears won’t be shaken.
Opinion has hardened around the position that China’s economy will stabilize, but not accelerate. And this weighs on prices. The consensus estimate is that, by the end of the year, copper prices will rise just 4.9% from Monday’s close.
But copper miners themselves are much more optimistic. To be sure, you can say it’s their job to be optimistic. But they also have some good points on their side.
And the recent data seems to support their case.
The International Copper Study Group said demand has exceeded supply by 155,000 metric tons in the first four months of the year. That’s up from the 64,000-ton gap recorded a year earlier.
And longer term, Goldman Sachs says it sees “severe deficits” in the global copper supply-demand balance starting in just a few years, as this chart from Bloomberg shows.
Goldman Sachs now estimates that copper will be in structural “severe deficits” starting from 2023.
We seem to be seeing this good ol’ fashioned supply-demand squeeze developing in copper now. Old mines are shutting down. New mines are scarce, and not big enough to fill the gap.
In a recent presentation, Southern Copper (NYSE: SCCO) projected 2.5% copper demand growth this year, and supply growth of only 1.5%. Stockpiles will only get ya so far.
So how can you play this?
You could buy a fund that tracks the price of the metal itself, like the U.S. Copper Index Fund (NYSEArca: CPER).
Or, you could buy Southern Copper or another major copper producer, like Rio Tinto (NYSE: RIO) or Freeport-McMoRan (NYSE: FCX).
In the past three months, ALL these stocks have traded lower. But some are outperforming the others.
Rio Tinto, for example. It’s a big iron ore producer, in addition to copper and other minerals.
While I don’t see the bottom in copper and other industrial metals yet, we could be a lot closer than the market thinks.
And you’ll want to be a member of my Supercycle Investor — where we just banked six rounds of gold gains — when that happens.
We’re already getting positioned to pounce on the next profit opportunity in metals, miners and more. Don’t miss out on it. Click here to join us today.
All the best,
P.S. I recently talked to Brian Bergot, Investor Relations VP at Taseko Mines (NYSE: TGB). He made his case for why the copper squeeze will come on the supply side. He also makes a good case for Taseko itself. You can watch that video here.