-- Copper -- Copper, the metal economists typically look at for the health of the economy, is flashing recessionary signals through its price, which has fallen more than 10% over the past two months, QI Insights says.

While it is often viewed as a proxy for growth in its largest consuming nation China, the metal — alternatively known as ‘Dr. Copper’ for its use as a diagnostic tool for the global economy — has greater relevance, adds QI .

Since the end of March, New York-traded copper futures have lost about 13% of their value, falling from a high above $4.17 to around $3.58 on Wednesday.

“If you’re bearish China, you’re probably going to ignore this signal,” QI said in a note. “But just be aware Dr. Copper is already pricing in a fair amount of bad economic news. Put another way, you need to see the economic data materially worsen from here, i.e. a recession is imminent.”

QI, however, said the so-called model value for copper has only fallen by 1.25% since April, moderated by growth across the United States, China, Europe and Japan.

“The offset has come from financial conditions,” said the QI note. “Credit spreads are the next biggest driver, explaining 17% of the model. Tight credit spreads and market pricing of central bank rate cuts together have helped nullify the deterioration in the growth picture.”

Also, another valuation metric for copper, known as the “Fair Value Gap,” or FVG, was at 8.3% below the model value, QI said.

This is “the cheapest it has been in this current regime, dating back to July last year,” the QI note said.

“If you’re a contrarian, note [that] using this FVG as a buy-the-dip signal has produced 13 trades (so almost once a year), has a 62% hit rate, typically taking around four weeks to produce a +0.85% average return.”

But QI also cautioned against expectations of easy profiting from a copper buy now, especially with the Federal Reserve bent on further monetary tightening when, ideally, the central bank should consider rolling back its more than year-long aggressive action that has added 500 basis points to U.S. interest rates.

“The health warning this time is you need financial conditions to stay easy,” the QI note said. “In plain terms, you need the Fed to embrace a dovish pivot; the risk scenario is a hawkish Fed that sticks to their higher-for-longer mantra.”

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