There’s no disputing it, copper is one of the modern world’s most vital resources.
Its uses have become central to an infinite variety of domestic, industrial, and high-technology applications, and its demand is increasing by more than 575,000 tons annually and accelerating.
Now, consider for a moment the fact that there is only so much copper in the earth, and without it we likely wouldn’t have electricity, air conditioning and many other conveniences. It stands to reason that with population growth and the supply and demand dynamics at work, its value would increase over time, right?
In bullion form, copper is basically a long term play, perhaps more so than other investment grade metals due to its recyclability. And although it may be easy to appreciate copper’s fundamental role in modern living, not many of us are aware of the potential of copper bullion as an investment asset.
Copper is often dismissed as “just another commodity” even though it’s arguably the most useful of all the industrial metals. Most copper bullion investors don’t even realize that copper futures are traded on the COMEX with an average DAILY volume exceeding 300,000 and assets over $120 million.
Keep in mind, these paper contracts are purchased for the delivery of literally TONS of industrial copper, which sets the market price. Most investors are not prepared to pay for and take delivery of tons of copper bullion however, so that “spot price” quickly becomes a huge understatement of the real price of copper bullion.
Our customers buy copper coins and bars out of interest, investment speculation, for barter purposes, and because of an attractive price point. And because many of them believe copper bullion has a lot of potential for growth, and has a strategic place in their metals portfolio.
The fundamentals of supply and demand are of course the main driving factors behind copper’s favorable forecast over the next several years.
Let’s explore demand first…
Much of the world’s infrastructure – including utility lines, construction, transportation and more – all rely heavily on copper. One example, automobiles…every single one of them has between 50 and 100 pounds of copper, depending on the size of the vehicle!
Emerging economies in Asia are demanding more and more copper. A rising standard of living coupled with an ever increasing number of infrastructure projects in China, India and elsewhere are contributing heavily to copper’s growth. Just consider that 25% of China’s population is now considered middle class – that number is expected to double in the next decade!!
As a population’s income rises, so does the desire for an increased quality of living. More housing construction for example will translate into more electrical wiring, more plumbing and more basic appliances and materials.
It’s also projected that all Asian countries, excluding Japan, will spend $1.4 trillion on infrastructure projects in the next decade.
Copper supply – finite and diminishing
Copper supplies are not keeping pace with the ever-increasing demand, it’s that simple. No major discoveries of new reserves have occurred in many years. Even if a big supply were found today, it would take years to bring those resources to market.
Current supplies are most certainly considered finite and being strained relative to demand. It’s in fact expected that existent copper from open-pit mines will run out in the next decade according to an exclusive report from InvestmentU.com.
If you simply consider figures from the Royal Bank of Scotland that global mine production only increased 15% from 2002 to 2012 while demand quadrupled, it’s not hard to understand copper’s future growth potential.
The Currency Effect – Copper’s wild card
Another wild card playing into the copper markets is the value of the U.S. Dollar and how other countries, namely China, manage their currency. In the last few years, the world has witnessed tremendous monetary expansion. While the U.S. has led the world in monetary stimulus efforts, they are by no means the only nation to inject money into their economy to stimulate growth.
The more dollars there are in circulation, the higher prices will become for a whole host of commodities, including copper.
Also, if China were to make some changes to how their currency is pegged to the U.S. Dollar, copper volatility might follow. According to this report from SeekingAlpha, the move would make copper a little cheaper in China and thus, propel demand even higher.
Copper bullion comes in a variety of coins and bars, all of which are considered inexpensive. Including copper in your precious metals portfolio now can position you to take advantage of a bull run that’s still in the early stages.
It should be exciting – investors still have a great opportunity to stake a claim in copper. To buy copper bars and coins, visit Provident Metals and view our selection.
As always, leave a comment or make a prediction below, and thanks for reading!
