Over the past few months, I have maintained a consistently bullish outlook on copper, anticipating a rebound from the $4 per pound support level and a strong rally.
This scenario has particularly intrigued me because a rise in copper would provide a significant boost to silver. I believe that copper's sluggish performance has been a key factor holding back silver's advance, as the two metals are highly correlated and arbitrage algorithms reinforce their relationship.
Last week, my expectations were validated when copper broke out of an important triangle pattern that had been forming since May.
Copper rebounded from the $4 support level in early January, rising rapidly and breaking out of the triangle pattern, a strong signal that further upward momentum is likely.
Several factors have driven this rally, including the launch of technical buying programs, stockpiling in anticipation of potential tariffs, and expectations of a major stimulus program as China's economy continues to struggle.
In addition, strong demand from electric vehicles, data centers, and renewable energy has further supported copper's strength.
A decisive break above this zone should herald a full-blown bull market, which would also be very beneficial for silver. I will discuss this correlation in more detail later in the article.
This index is the average price of copper and gold, with copper adjusted by a factor of 540 to prevent gold from disproportionately influencing the index. The SSPI (Silver Price Index) accurately reflects the movement of the price of silver, even though silver itself is not a commodity.