A coordinated effort by central banks across the globe has eased inter bank lending rates, but that's not a complete indicator of the health of an economy. In fact little of what central banks are doing at the moment directly injects economic stimulus. It is simply an attempt to put a floor on asset prices by expanding the money supply, and thus keep the economy on a path of inflation.
Industrial metals like Copper and Zinc are a truer indication of industrial production. They however show that deflationary pressures continue to plague the real economy.
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| London Metals exchange Spot Price Copper YTD |
This chart shows a volatile trend from its heights post GFC to now. It's a type of honesty in portraying industrial activity from electronics to construction. And unlike the precious metals, a diverse industry puts universal pressure to bear on spot prices.
In fact one can plot copper with equity share indexes, they are in lock step. Neither leads nor follows, but they both move together in unison.
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| ASX All Ords YTD, follows copper every rise and fall |
The recent uptrend is only days old, with central banks cutting the cost of borrowing USD, primarily to put support under the insolvent banks in Europe.
Gold can only be trusted as a fear indicator. Silver is almost universally employed in Solar PV panels, which buoyed by Government subsidy and is abnormally inflated at the moment. But trust Dr Copper to give a true indication in the health of real economic activity.
