Commodities Super-Cycle: Copper hits Records as Gold Flashes Warning Signs

WikiFX

| 2026-01-06 18:10

Abstract：Copper prices have smashed historical records amid a supply crisis, while UBS warns that Gold's rally may face short-term turbulence despite a $4,750 long-term target. The diverging paths of industrial vs. precious metals highlight unique risk factors.

The commodities complex is diverging, with industrial metals staging a historic breakout while precious metals face scrutiny over valuation and correlation breakdowns.

The Copper “Perfect Storm”

London Metal Exchange (LME) copper prices have shattered records, surging past $13,250 per tonne. Analysts are describing the current environment as a “perfect storm” driven by structural shortages and insatiable demand from the AI and green energy sectors.

Supply Shock: A lack of investment in new mines, coupled with operational disruptions in key producing nations like Chile and Indonesia, has left supply buffers dangerously thin.

Trade War Distortions: The looming threat of US tariffs has triggered premature stockpiling. US inventories now account for nearly half of global stocks despite the US consuming less than 10% of global copper, exacerbating shortages in Asia.

With Citigroup projecting a refined copper deficit of over 300k tonnes by 2026, the “buy the dip” mentality in industrial metals remains robust, likely supporting the Australian Dollar (AUD) and Chilean Peso (CLP).

UBS: Gold is “Hitching a Ride”

Conversely, UBS has issued a tactical warning on Gold (XAU/USD). While the Swiss bank maintains a bullish long-term target of $4,750/oz, its strategy team argues that the recent December rally was driven more by correlation with surging white metals (Silver, Platinum, Palladium) than by gold-specific fundamentals.

Key concerns include:

1. Broken Correlations: The traditional inverse relationship between Gold and US real rates has fractured.

2. Volatility Spike: Gold's volatility has returned to levels seen during the onset of the Russia-Ukraine conflict, reducing its utility as a low-volatility portfolio stabilizer.

3. Hitching a Ride: UBS notes that recent gains were a “beta trade” on the explosive moves in silver and platinum.

While a crash (20%+ drop) is deemed unlikely due to central bank buying from Emerging Markets, traders should remain alert for a short-term correction if the white metal frenzy cools. The bank advises that the next leg up for Gold will require a structural decline in US real rates or a fresh geopolitical shock.