A Not So Obvious Reason To Be Bullish On Copper

Housing has finally come off its bottom and may be entering a long-term bull market. A strong indication of this reality is that the homebuilding stocks have been among the market leaders in 2012, as the SPDR S&P 500 Homebuilder ETF (XHB) is up 45.4% year-to-date. While homebuilding stocks including XHB, which holds a basket of such home-building equities, is certainly a strong buy on a confirmed housing rebound, owning copper is another lesser known but potentially highly rewarding pin action play to consider. If housing is indeed picking up again, it may serve as another catalyst for the price of copper because the home and office building construction sectors use approximately 40% of the copper in the United States, with direct residential construction constituting approximately two-thirds of the market. There are approximately 200 pounds of copper electrical wire in the average new home constructed in 2011. This figure doesn't even include the amount of copper wiring that goes into additional home appliances, plumbing and air-conditioning systems. If housing has bottomed and new home construction continues then copper should have a tailwind leading to prices continuing to rise as the housing and homebuilding market improves. There is some evidence that things are improving. United States homebuilder confidence was up sharply in July, and hit a five-year high in August. In September it ticked even higher to hit the best reading since June 2006 and rose even further in October. Coupled with increasing property sales in China, a rapidly growing country for housing, I think we could see increased copper demand in the next few quarters. I recommend the following methods right now to play copper...READ MORE