After silver, Copper is next in line to be gold

By Sebastien Wright

Many people invest in precious metal commodities such as gold and silver but not everyone considers non-precious base metals like copper and nickel.

Unlike precious metals, the prices of base metals are more related to the health of an economy than emotion or world events. Another appealing thing about investing in base metals as the amount of capital involved is considerably less than precious metals.

What does the future hold for copper? Obviously nobody has a crystal ball but if we look at history first, we may get a glance into what the future might hold. In the 1990's, copper prices realized some significant increases due mostly to strong demand from telephone companies who were building copper infrastructure prior to the explosion of fibre optic construction.

This increase in infrastructure spend resulted in a glut of copper when the telecom industry fell upon hard times and also when fibre started to replace copper.

Fast forward to today and we are seeing an unprecedented demand for copper when we look at growing infrastructure demands from emerging economies such as China and India. As wealth is built in these economies, the demand for infrastructure increases exponentially and when we consider materials such as copper for use in electrical wiring and plumbing, one can predict that the demand for copper should continue to increase.

For the investor interested in copper as an investment, there are many methods to consider for investing. One can try and determine the best metal stocks to purchase but doing statistical analysis on commodities. Since copper is so closely tied to the health of the economy, another investment to consider could be index ETF's or mutual funds. Another means of investment would be to purchase copper bars or bouillon.

Another seemingly less sophisticated means of investing in copper but my no means less effective is to collect pre 1982 pennies. Many people may not be aware of this but pennies made prior to 1982 are made from pure copper whereas pennies made after 1982 are only coated in copper.

This may sound insignificant but to illustrate the value of this, a pre-1982 penny is current worth 2.9 cents in it's weight of pure copper! This equates to basically 3 times the penny's face value and could conceivably increase as copper is in higher demand.

Another interesting thing to consider about copper is that it may play a significant role in future purchasing as the US dollar and other currencies continue to lose value. Many experts agree that fiat currencies (basically paper currencies) all lose value over time but a commodity such as a base metal or precious metal do not.

The challenge with using gold for example as a currency is that is almost too valuable. If you needed to make a small purchase and all you had was an ounce of gold, this would not be ideal. It would be like purchasing a chocolate bar with a $1000 bill! Metals such as copper on the other hand that have a traditionally lower value per ounce would make an ideal metal for smaller purchases.

In closing, base metals such as copper may not be nearly as sexy as gold or silver but in the long run, a commodity that has a real use in construction and one that is tied to the world economy should continue to be in demand. As with any investment, the key to success is education and knowing what you are doing. There are many books available as well as online information on how to invest in copper and other metals.

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