This Important Metal Could Be on the Verge of a Mega-Breakout

Gold has been on a tear since 2022, leaving other metals in the dust. Nevertheless, it's important to remember that the yellow metal has a strong tendency to lead commodities in general, which implies the likelihood of inflationary pressures in the commodity pits going forward. The leads and lags vary from cycle to cycle, of course, but a close examination of copper's current technical position suggests that a huge upside breakout may be about to take place. And wherever copper goes, industrial commodity prices often follow.

The Economy and the Copper Price

Current economic activity in the form of ISM manufacturing new orders, or rather its long-term KST, is certainly consistent with such a scenario. For example, the vertical green lines in Chart 1 flag when the KST moves above its equilibrium level. If you look to their right in the upper window, you can see there were 11 examples in which the copper price firmed up, and 2 where it didn't. While the latest signal is not guaranteed to be profitable, the odds at 11:2 is certainly favorable.

Chart 2 features copper and its long-term KST. The arrows approximate buy signals that took place from a sub-zero position. Since the turn of the century, there have been six, only one of which was sub-par. Right now, this indicator is in a bullish mode, but barely so, as it is right at its 9-month MA. The price moved above a 15-year resistance trendline in March, but subsequently corrected. It is currently attempting to recapture that breakout.

Chart 3 shows that the PPO, using the 6- and 15-month parameters, is currently above zero. This is a positive sign, as most of the long-term declines have occurred when it was positioned below zero.

False upside breakouts are usually followed by an above-average decline, as traders scramble to get back to the right side of the market. That's exactly what we see in early 2022, with a less intensive pull-back following the false move that developed in 2024. Occasionally, though, the price regroups and pushes higher anyway. Note that the false 2022 break was confirmed with the violation of the red trendline; this was not the case with the 2025 break, as the price has regained its composure by zig-zagging slightly higher. Now, the short-term KST has started to rise, and another attempt at a successful break appears likely.

Copper Shares Likely to Join Any Breakout in the Metal

Chart 5 features the Global X Copper Miners ETF (CDPX), which tends to move in sympathy with longer-term swings in the price of the metal. It experienced a downside break earlier in the year, one that looks similar to the 2019-2020 break. It appears that a similar setup is occurring today.

I have put a question mark next to the word "whipsaw" because it has not been confirmed by a violation of green down trendline 2, as the 2020 example was with trendline 1. Note that the Special K(SPK) is also rubbing up against a 3-year down trendline, all of which tells us that just a small amount of strength, e.g. a daily close in the $43-44 area, is required to trigger a major breakout for this ETF.

Inflationary Implications of a Copper Breakout

Chart 6 features the copper price in the top window, with its long-term KST in the bottom. The vertical green lines approximate sub-zero KST buy signals. If you look to their right, you can see that the 12-month ROC of the CPI typically firms up. The magnitude and duration of these rallies varies from cycle to cycle and does not appear to be related to the size of the KST up wave. A CPI "buy" signal was generated in late 2024 but, so far, has had a negligible effect. Based on the record of this relationship since 1976, in which all but two KST signals were followed by some form of CPI rally, it is difficult not to conclude that if a copper breakout takes place, it will not be followed by a firming in the 12-month ROC of the CPI.

Good luck and good charting,

Martin J. Pring

The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Groupof Walnut Creek or its affiliates.