Making sense of market moves
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Gold and silver’s little cousin has stepped into the spotlight this year: Copper prices hit a new all-time high on Monday, and the price of the precious metal has surged 25% year to date.
Demand for copper has risen thanks to its role as a key raw material for pretty much every buzzy trend on Wall Street, from AI to electric vehicles to data storage.
Yet the story of copper’s rise isn’t a simple matter of supply and demand. Global superpowers are dueling over stakes in lucrative mining firms, since the resource is crucial to ramping up goals for a clean energy transition. The Biden administration is on the hunt for copper mines to snag a stake in—reportedly in talks with investors to invest $3 billion in beleaguered Zambian mine First Quantum Minerals.
The combination of high demand and stiff competition for supply is a powerful one, according to Jeff Currie, chief strategy officer at the Carlyle Group. He’s been touting the copper trade for weeks now, and recently told Bloomberg’s Odd Lots podcast that copper “is the most compelling trade I have ever seen.”
“You look at the demand story, it's got green CapEx, it's got AI, remember AI can't happen without the energy demand and the constraint on the electricity grid is going to be copper,” he said. “And then you have the military demand. So unprecedented demand growth against unprecedented weakness in supply growth because we have not been investing, it's teed you up for what I would argue is the most bullish commodity.”
The surge in the precious metal’s price this year has begun to raise eyebrows, with some on Wall Street worried that the trade has run too far and that waiting for a pullback might be the smarter move at this point.
But that hasn’t stopped eager investors from chasing the copper rush. The $2.38 billion Global X Copper Miners ETF (COPX) has seen a staggering $76 million in inflows to the fund this year.
Or if you prefer, you could always keep your copper investments in physical bar form—they’re not as flashy as gold bars, but they’ll still do the trick.—MR & LB