Gold and copper have emerged as key players in the global financial markets amidst escalating geopolitical tensions. Gold, known as a safe haven in turbulent times, has seen prices near all-time highs and central banks are increasing their gold reserves, signaling a shift towards the metal as a reserve currency. On the other hand, copper, often referred to as “Dr. Copper” for its ability to predict economic trends, has seen a significant price increase due to strong global economic activity and increasing demand from energy transition technologies like electric vehicles and renewable energy sources.
The global copper market is tightening due to production challenges, leading to a limited supply growth this year, although a rebound is expected in 2025. Despite these challenges, the demand for copper continues to grow, driven by its critical role in green energy solutions. The International Copper Association forecasts a substantial increase in copper demand by 2040, with a compound annual growth rate of 1.85%.
The JPMorgan Global Manufacturing PMI has shown a slight decline but remains above the neutral mark, indicating expansion and sustaining demand for industrial metals like copper. Rising input costs and selling prices within the manufacturing sector suggest building price pressures, raising concerns about inflation and impacting commodity prices and investment returns. Investments in the energy transition towards a low-carbon economy have reached $1.8 trillion in 2023, driving further demand for copper.
For investors, the implication of these trends is clear. Gold remains a crucial asset in any diversified portfolio, especially for hedging against geopolitical risks and inflation. With strong demand from central banks, a 10% weighting in gold is recommended, with 5% in physical gold and 5% in high-quality gold mining stocks, mutual funds, and ETFs. Copper, on the other hand, presents a compelling growth story tied to the global economic recovery and the transition to green energy. The expected increase in demand and current supply constraints indicate potential for rising prices, offering valuable opportunities for investors.
