MUMBAI (Commodity Online): Gold is the hottest commodity among the bullion metals. Copper is the hottest commodity in the base metals camp. But if you compare gold with copper, which is hottest? Gold or copper? Which commodity will you invest in? Is gold or copper which is shining better?

Read here an interesting comparison analysis on gold versus copper, from technicalcommoditytrader.com:

For any investor trying to sum up the copper situation, he/she must come to grips with many conflicting forces all vying to affect its price. The mass media continues to send signals that the worst is over and recovery is at hand in the global market place. Meanwhile some pretty savvy analysts on the internet are telling us to hold on to our buttocks as the next wave of credit contraction is upon us this fall as the commercial real estate market is about to embark on the same road as the residential real estate market followed last year. If this is the case then the markets could be in for another bout of cascading selloffs as were witnessed last year. Let’s discuss both, and then look at the price charts to see if they offer clues and potential tactics we might employ.

Let us first look at the economic recovery. Is there really a recovery going on? Well, there is certainly a bounce from horrific levels we saw last year in almost all markets. The latest reports suggest that China has been buying up commodities and grains while prices are low. That data is correct. They have been huge buyers of both. While there are many reasons for China to do so, stock piling is not a LONG TERM bullish factor in any market. However, should an economic turnaround really develop and the China miracle does indeed resume, then a bullish case for a new commodity rise may indeed have merit. Such bullishness however is not necessarily a guaranteed event. As we have witnessed over the past decade, prices can, will, and do swing wildly, and copper has been no exception either. Rather than trying to discern the economic tea leaves today, let’s take a look at the price history of copper to see if there’s something there that we can discern from the past and maybe get a better perspective of the future. The best place to start is the long term.
The copper chart below is from 1960 to 2006.

As you can see, for some 40 odd years, copper traded between the 40 cent and the $1.60 cent price range. There are a few things we can discern from this price action. The first is that when copper moves, it moves in big percentage terms. From the beginning of 1973 to early 1974 the price of copper tripled from about 50 cents to $1.40 in about 14 months. Recall that the first Crude Oil shocks the USA received was in the same time frame, and if I am not mistaken, gold had its first big rally around that time period as well. Just as fast as she went up, copper came a tumbling down right back to where the initial rally began from. Now this is a great example for us to understand that the collapse in copper this year all the way back to the $1.20 area is not an isolated event. In fact, the rise from 1977 into 1980 also witnessed pretty much a tripling of price and a subsequent drop all the way back to its original starting price range. This second major rise culminated with the precious metals peak of 1980 when gold reached 875 per oz and silver an astounding $50 dollars per ounce. This second major peak would take seven years to bottom out in the copper market. As before, it would retrace all of the price gains.

Most interesting is that the 1987 bottom and subsequent rally began right after the stock market crash from that year (which is what we’ve seen since spring this year). The 1987 rally began at the 80 cent level and doubled reaching a new all time high at $1.57. This price peak would last 17 years before being exceeded again.

From 1989 thru 1994, copper prices once again drifted lower, this time along with the mini housing correction of that time. But in December of 1994, copper once again embarked on a year long rally that would double the price of copper from about the .70 cent level to just under $1.40. Here price stayed in a narrow range for all of 1995 but eventually buckled in 1996 as the precious metals market embarked into its final wave down in price. The eventual low for copper came in 1999 and in December of 2001. Here again we see that copper bottomed near the precious metal (stock) lows of 1999, and also copper’s 2001 low coincided again with the stock market crash lows shortly after the 911 incident as well as the beginnings of the Gold bullion bull market.

For the next 22 months (2002-2003) copper traded in a very narrow 10 cent range between 70 and 80 cents. It was the quietest period for copper in over 10 years.

During this time the precious metals launched their first big rally since 1987, and as it turned out to be, the biggest rally in 20 years for gold and silver. Consequently a strange phenomenon occurred in the markets of that time. THEY ALL STARTED GOING UP. All with the exception of the US dollar, as that one went in the opposite direction. But it didn’t matter whether you were in gold or stocks, or real estate, heck…….EVEN BONDS !!!!!!! All markets were going up. And copper was not about to be left behind.

After meandering in the $1.20 to $1.40 area for all of 2004 and into the fall of 2005, copper began an autumn move from $1.20 to $1.60 going into December. From this December timeframe a MAJOR acceleration began and by early 2006, copper broke above the $1.60 area and penetrated its 17 year high point. It was at this point that the China miracle was in full play, gold had finally broken above 525 for the first time in 20 plus years and even the American stock market, which had been given a 50% haircut, began a recovery that would eventually lead the Dow to new highs and the S&P to match its previous all time highs as well. Copper would eventually move from .80 cents to over $4.00 going into 2008.

Now we’re going to zoom back in and look at our price chart over the last three years. The first thing I want to bring to your attention is how many times in the above paragraphs that I mentioned the month of December. Not necessarily December, but the December to March time frame has been a major turning point for copper many times in the past. Some have been major highs, and some have been major lows. We can see this confluence much more so in the chart below. Look at the last three years. Where have been the major lows? That’s right. In the December/February timeframe, copper has made it’s lows in this timeframe.

So what conclusions and assumptions should we draw from our trek into the past 50 years of copper?

First and foremost, the December/March time frame is a great time to look for a low or a high. Look at the highs of 1966, 1968, 1970, 1974, 1980, 1989, 1995, and 2000. All of these highs occurred in the Jan to March timeframes. How bout the lows? The September to December time frame is a great time to look for a low. Look at the Sept/December times in 1967, 1968, 1972, 1975, 1978, 1986, 1989, 1991, 1993, and 2002. All provided rallies, some big, some not so big.

Secondly, copper has a tendency to rally during economic booms, when stock markets make a bottom, or rising precious metals are in play, and yes, during a housing boom.

Third, copper prices, once they begin to trend usually rise anywhere from 100 to 400%, depending on how many of the above actions are in play. The 400% rise witnessed this decade came at a time when housing prices were soaring to all time highs, precious metals were soaring to all time highs, stock markets had bottomed from a massive correction, and China was in an economic boom. Our friend Mr. Copper was firing on all cylinders and prices moved dramatically.

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