Copper, gold and charts: Bullish signs emerge

Over the past several weeks, the Nifty has largely traded within a defined range of 24,500 to 25,160 before briefly attempting a breakout. However, the breakout proved unsustainable, and the index has since reverted to this consolidation zone.

The good news – the primary uptrend remains intact

However…it appears disrupted in the short term. It is also not helped by the developments in the USA, with the August 1 tariff deadline almost here.

FIIs have maintained a cautious stance, recording net outflows exceeding ₹35,000 crore so far this year. Furthermore, their net short positions have surged to the highest levels seen since March, signaling persistent risk aversion.

Until greater clarity emerges on both global and domestic fronts, the market may continue to exhibit range-bound behavior with a defensive undertone.

Copper to Gold: Important cross-asset relationship

Amid the prevailing uncertainty, one lesser-discussed indicator that quietly suggests underlying strength in equity markets is the Copper-to-Gold ratio. This ratio compares the price of copper—often seen as a barometer of economic activity—with that of gold, which is typically viewed as a safe-haven asset. When the ratio rises, it indicates growing confidence in economic growth and risk assets like equities. Conversely, a falling ratio reflects risk aversion and a preference for safety.

Currently, this ratio has shown signs of improvement, subtly pointing to potential resilience in the markets despite global headwinds.

The RS line has taken support at a multi-year base and has rebounded off that point. In the process, it has penetrated the first-level resistance in the form of a falling trendline. For India, this is significant.

Global economic trends, especially those in the US and China, heavily influence Indian markets. A rising Copper-to-Gold ratio may reflect improving sentiment in these larger economies, which can spill over into Indian equities through increased foreign investments or stronger demand for exports.

This ratio is also useful because it simplifies the complex interplay between growth and safety. Unlike technical indicators that focus on price patterns, the Copper-to-Gold ratio offers a macro-level signal rooted in real-world economic behavior. It helps investors gauge broader market sentiment, especially when other signals remain mixed or unclear.

MCX Copper: A Buyoant Setup Awaits A Trigger

Between February and May 2023, copper staged a sharp rally, rising from a low of ₹700 to a peak of ₹952. Following this strong uptrend, the metal underwent a corrective phase and has since traded within a broadly defined range. Over the past 18 months, copper has repeatedly tested a key resistance zone between ₹900 and ₹910, establishing this level as a significant technical barrier.

Recent price action suggests that copper is consolidating near this resistance, potentially setting the stage for a fresh upward move. A decisive breakout above the ₹910 level would likely confirm the resumption of the uptrend and could open the path for further gains. Given copper’s role as a global economic barometer, such a move may also carry broader implications for market sentiment.

Parting thought

The improving Copper-to-Gold ratio continues to signal a potential shift in market sentiment toward risk-on assets, which historically bodes well for equities. As global uncertainties begin to ease, emerging markets like India are likely to catch up, supported by favorable macro trends and renewed investor confidence.

On an individual basis, copper appears technically poised for a meaningful rally, with its price action nearing a breakout level that could confirm the resumption of its uptrend.

Taken together, these developments suggest that while short-term caution may persist, the medium-term outlook for risk assets and commodities remains constructive.