Copper-Gold Ratio: The Cycle Signal
45sIntroduces a little-known but powerful economic indicator that could predict market turns, sparking curiosity and engagement.
▶ Play ClipAI Summary
This video explains the copper-gold ratio, a key economic indicator that tracks the price of copper relative to gold. It argues that this ratio moves in long-term cycles that historically signal shifts in the economic cycle, with significant implications for risk assets like stocks and Bitcoin. The video suggests the ratio may be on the verge of a major cycle turn.
Chapters
[00:00]
The Copper-Gold Ratio as a Cycle Indicator
The copper-gold ratio is presented as a signpost for the economic cycle, with big implications for risk assets like stocks and Bitcoin. It measures the price of copper relative to gold, similar to charting Bitcoin against USDT or ETH.
[01:05]
Long-Term Cycles and Phases
For over three decades, the copper-gold ratio has moved in long-term cycles of roughly three to six years. Each cycle is split into a rising phase (green) and a falling phase (red), which correspond to upturns and downturns in the ISM (Institute for Supply Management) index.
[01:31]
Copper-Gold Ratio and Stock Performance
The strongest periods for US stock indices have historically coincided with rising phases in the copper-gold ratio. When the ratio spikes up, the S&P tends to rise in the same windows, even if the move is small. Equity bear markets and flat, choppy periods almost always coincide with falling phases of the ratio.
[02:33]
Not Always Bad for Stocks
A falling copper-gold ratio is not always bad for stocks. For example, from the start of 2022, the S&P has trended upward despite the ratio declining, after an initial bear market in the front half of that period.
[02:51]
Bitcoin Mania and Bear Markets
All of Bitcoin's mania bursts (2012, 2013, 2016, 2017, 2020, 2021) have coincided with rising phases in the copper-gold ratio. Conversely, all of Bitcoin's bear markets have coincided with falling phases in the ratio.
The copper-gold ratio is a powerful cyclical indicator that has historically aligned with the performance of risk assets like stocks and Bitcoin. Its current potential turn could signal a significant shift in the economic cycle, making it a key metric to watch.
Mentioned in this Video
💡 Key Takeaways
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Copper-Gold Ratio as a Cycle Signpost
Establishes the core premise that this ratio is a leading indicator for the economic cycle and risk assets.
📊
Correlation with Stock Performance
Provides historical evidence that rising phases in the ratio align with strong stock market performance.
01:31
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Bitcoin's Correlation with the Ratio
Reveals a strong historical link between Bitcoin's bull and bear markets and the ratio's phases.
02:51Full Transcript
[00:00] I'll read it for the viewers. Markets are all about cycles, the same cycles repeating over and over again. And one big cycle indicator might be flashing a signal right now. It's the copper gold ratio.
[00:13] The copper gold ratio is important because it's a signpost that tells us that where we are in the economic cycle. It has big implications for risk assets like stocks and Bitcoin.
[00:25] And it might be making a big cycle turn. what is the copper gold ratio yeah the copper gold ratio measures the price of copper relative to the price of gold and it's just like when we effectively chart bitcoin against usdt or
[00:41] bitcoin against eth or bitcoin against seoul are you seeing which one is outperforming effectively so ie on that chart i just showed you if i'm to get rid of the ism um what you want to see
[00:53] in this chart effectively is copper is outperforming gold when this is moving up so i.e this window here this window here this window here and what i believe we're going to see will be this window
[01:05] here um so here he shows us this and here he's kindly outlined i didn't have time to do this unfortunately but he's correctly clearly outlined uh these phases so for more than three decades
[01:18] the copper gold ratio has moved in long-term cycles of roughly three to six years we can separate each individual cycle into two phases a rising phase green and a falling phase red so i.e
[01:31] green would be momentum of the ism going up and red would be downturn of it effectively so what does the copper gold ratio mean for risk assets The strongest periods of performance for US stock indices have historically coincided with rising phases in the copper gold ratio and you can see
[01:47] here again as it's done this very nice graphic when the S&P you can see when copper gold ratio spikes up S&P typically rises in those same windows as well even if the copper gold ratio isn't a massive spike.
[02:00] Like here, it's quite a small grind up and to the right. And we saw the same in the S&P. And you can see it here and here. Whereas equity bear markets and extended flat choppy periods
[02:15] almost always coincide with copper-gold ratio falling phases, although a falling phase is not always bad news for stocks. So what we've outlined there is, so again, this period here where you could say the S&P arguably from point A to point B was still rising but copper gold ratio
[02:33] is down is that the copper gold ratio going down isn't always bad for stocks and this current period routine also shows us that because copper gold ratio has been going down what's happened to S&P arguably since well the start of 2022 up and to the right even though we had that bear market
[02:51] kind of just in the front half of it. All of Bitcoin's mania bursts 2012, 2013, 2016, 2017, 2020 and 2021 have coincided with rising phases in the copper gold ratio,
[03:07] while all of Bitcoin's bear markets have coincided with the falling phases in the copper gold ratio.