The metals market is entering a paradoxical phase. Despite ongoing geopolitical frictions, which would normally support safe‑haven assets, gold is losing ground, falling back below USD 4,500 per ounce. The surge in oil prices is fuelling concerns about persistent inflation, leading markets to conclude that the U.S. Federal Reserve is unlikely to cut interest rates anytime soon. In an environment where high rates are expected to last, gold, an asset that generates no yield, becomes mechanically less attractive.
The same dynamic is hitting copper, which has dropped roughly 7% since the beginning of the month. Investors fear that expensive energy and elevated borrowing costs will slow global economic growth and reduce demand for industrial metals. Copper is now trading around USD 12,174 per tonne (spot) in London.
The simultaneous correction in gold and copper illustrates a market driven more by macroeconomic expectations than by physical fundamentals.
Gold is being penalized by the prospect of persistently high interest rates: the higher real rates rise, the greater the opportunity cost of holding a non‑yielding asset. The Fed’s reluctance to ease policy, a direct consequence of inflationary pressure from oil, weighs heavily on the yellow metal. The geopolitical premium exists, but it is no longer sufficient to offset the rate effect.
Copper, meanwhile, is suffering from fears of a global industrial slowdown. High energy prices, tighter financial conditions and concerns about Chinese demand are pushing investors into a more defensive stance. The metal, often seen as a barometer of global activity, reflects these anxieties through its recent decline.
The market appears to believe that geopolitical tensions support oil prices but simultaneously weaken global growth, a combination that depresses industrial metals and neutralizes gold. This creates an environment where commodities move in opposite directions depending on their sensitivity to interest rates or economic momentum.
In the short term, pressure on gold may persist as long as the Fed maintains a firm stance. For copper, the trajectory will depend on whether China and the United States can stabilize their industrial cycles. Investors must navigate a market where macro signals dominate physical fundamentals.