Copper prices have crashed in recent days amid growing panic over the impact of the coronavirus, and the metal's reputation as a barometer for the global economy means analysts are looking to see if it has further to fall.
On Thursday, copper prices hit their lowest level since January 2016, with three-month copper futures on the London Metal Exchange touching $4,371 per metric ton. That's down from a high of around over $6,340 in mid-January. By 6.30 a.m. London time, copper prices were trading around $4,548.
In this chart, the copper/gold ratio is illustrated alongside the 10-year Treasury yield. Sovereign bonds are typically viewed — like gold — as a safe-haven investment. As such, bond prices, which move inversely to yields, tend to rise at a time of economic uncertainty, and yields fall. In this chart, there is a clear correlation historically between the price of Brent crude and the price of copper.
"Copper producers are, over time, going to have a lower cost of production due to this lower oil price — and all else equal, this will put downward pressure on the copper price," Layton said.
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