If you are interested in investing in copper you should consider investing in the best copper ETFs, which will give you exposure to the physical metal as well as the mining stocks. Copper is an interesting industrial metal that will always be needed for society. It is a ductile metal with very high thermal and electrical conductivity, and does well in inflationary environments like the one I believe we are in now and heading higher. There are many applications of copper that I will mention below which make the investing story even more interesting, as well as a possible supply and demand imbalance.
Physical Copper Uses and Applications
- Electrical wires (60%), roofing and plumbing (20%) and industrial machinery (15%) make up the major uses of copper (Source: Wikipedia).
- Copper is a good hedge against inflation. The price has increased nearly 600 percent in the past 10 years as inflation has increased.
- Copper is good at predicting the health and well being of an economy: "When copper prices rises, it is seen as a prediction that the economy is about to grow; when copper drops, often a decline in the stock market follows." (Copper Investing News.com).
- There have been an increase in the number of wire copper thefts of recent because of the higher price for copper, and I would expect these incidents to keep increasing as the price goes even higher.
Why Copper? Because Inflation is Going to Get Worse
I strongly feel that inflation, not deflation, is the future for many of the world's major economies such as the US and most of Europe.
I feel this way because the amount of national debt and public debt that these countries has piled up is massive. There is simply no way these developed nations can pay off their massive deficits without printing more currency.
This will lead to big inflation (possibly 5-10 percent or higher) and I think economic GDP will only increase slightly. But copper will do well because it's an inflationary environment and NOT deflationary - rising prices bode definitely bode well for copper.
For more please read Economic Deflation and Inflation - The Advantages and Causes of Both. I talk about other ways you can protect yourself from inflation or even deflation, if you think I'm wrong and that is coming instead.
"If you think I am right and think inflation is what's coming, basically what you are going to want to do is the exact opposite of the above.
You want to get out of your countries home currency as fast as you can because it will be losing value every year, and you’re going to want to purchase hard assets such as precious metals, oil, etc. Things like farm land, real estate and certain commodity stocks will do very well in this scenario."
Other Investments for Inflation
Again, remember that inflation is good for debtors and deflation is bad for debtors. The USA, along with their residents, are one of the most indebted nations in history currently.
-Gold should perform very well going forward if I'm right.
- Silver should perform even better, because silver is a monetary metal AND a useful industrial metal that has many uses.
- Farm land should do very well because food prices should rise.
- Timber and forrestry investment should do well.
- Basically most hard assets will do well. Platinum and palladium should also do very well, as should other metals.
- The people that will lose the most money going forward (in my opinion) are the people who have most of their money and savings in US dollars, because I think the dollar will start losing at least 3-4 percent of its value every year. US bank savings account will only pay you .40 percent interest or less.
- Even if you are in normal stocks, I think you will do better than if you had all your money in US dollars.
List of Copper ETFs to Buy
*COPX - The Global Copper Miners index.
Fund Summary: "The investment seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Copper Miners Index. The fund invests at least 80% of its total assets in the securities of the underlying index and in ADRs and GDRs based on the securities in the underlying index."
The holdings of this ETF include: Inmet Mining Corporation, Xstrara, Southern Cop. Corporation, Hudbay Minerals, etc.
This will give you exposure to the companies that mine the metal which should give you more leverage to an increase in the price of the metal. There is a little more risk in investing in the mining companies, but bigger potential for capital appreciation in my opinion.
*CU - First Trust ISE Global Copper Index
Fund Summary: "The fund normally invests at least 90% of assets in common stocks that comprise the index or in depositary receipts representing securities in the index. The index is designed to provide a benchmark for investors interested in tracking public companies that are active in the copper mining business based on analysis of revenue derived from the sale of copper. The fund is non-diversified."
This is another alternative to the COPX.
* ETFS Physical Copper (PHCU)
If you just want exposure to the physical metal, here it is.
"Physical Industrial Metal securities are backed by physical metal stored at London Metal Exchange (LME) Warehouses, the ownership of which is evidenced by LME Warrants (LME regulated warehouse receipts) or warehouse receipts held by the Issuer. All Physical Metal is held in LME approved warehouses and confirms to LME standards." (Source: ETFSecurities)
Copper Price Target - with the price currently around $3.60 per pound, I think copper will hit at least $5 in the next couple of years. I would not be shocked to see the price hit $10 this decade, either.
I like all three of these copper ETFs. If you are interested in investing in copper, I think you will do well investing in these copper ETFs!