Last year, both gold and copper performed strongly, with gold showing relatively more outstanding performance. The sustained rise in gold prices drove the copper-to-gold ratio (copper price divided by gold price) down to historically low levels by the end of 2025, which once became a major market focus. Since entering 2026, both gold and copper have generally exhibited high-level volatile trends, but the short-term and long-term drivers for these two commodities differ.
This year, gold prices have generally shown a pattern of rising, then falling back before fluctuating within a range. On one hand, global central bank gold purchases and geopolitical risks have provided a solid bottom support for gold prices. On the other hand, the high-interest-rate environment and pressure from profit-taking at elevated levels have limited the upside for gold prices, leading to intensified market battles between bulls and bears.
Analysts indicate that recent trading in the precious metals market has been influenced by factors such as uncertainties stemming from recurring Middle East geopolitical conflicts, expectations regarding Federal Reserve monetary policy, economic stagflation, and financial market risks. In the short term, gold is expected to continue experiencing broad fluctuations and consolidation. Long-term strategic optimism for precious metals remains, with pullbacks viewed as opportunities for medium- to long-term positioning.
The volatile Middle East situation has also impacted market assessments of base metals like copper. In the short term, the uncertainty surrounding Middle East developments fosters a wait-and-see sentiment that restricts copper prices from breaking upward. From a medium- to long-term perspective, the bullish case for copper is relatively clear, and copper prices may trend stronger within fluctuations.
Currently, the precious metals sector, led by gold, exhibits high volatility. Short-term geopolitical conflict uncertainties persist; each escalation in peace talk expectations or armed clashes can trigger gold price fluctuations, but their sustainability is limited. Gold remains in a short-term phase of volatile consolidation.
Despite recent rebounds, overall technical signals remain cautious. Multiple analysts note that gold is currently attempting to break out of a weak sideways pattern formed since early April, but chart patterns have not yet issued clear bullish signals, with the recent trend remaining weak. "Gold prices need a more forceful breakthrough above the $4800-$4900 per ounce range to confirm that bulls have regained control of the market; while a closing price below $4400 would be a warning signal," analysts believe.
The evolution of the Middle East situation has significantly pushed up international oil prices, and cooling expectations for global monetary easing, including Fed rate cuts, have contributed to sustained weakness in international gold prices. Against this backdrop, accelerated central bank gold purchases have provided some support for gold price movements.
"The fundamental reason for continued central bank gold purchases recently is new changes in the global political and economic landscape." This implies that, despite gold prices being at historical highs, the necessity for increasing gold holdings has risen from the perspective of optimizing international reserve structures. Additionally, gold is a globally accepted ultimate means of payment. Central bank gold purchases can enhance the credibility of sovereign currencies and create favorable conditions for the steady and prudent advancement of RMB internationalization. Considering various factors, central banks may continue to increase their gold holdings.
Data shows that the Chinese central bank increased its gold reserves by 8.1 tons in April and 5 tons in March, marking 18 consecutive months of additions, bringing total reserves to 74.64 million ounces. Globally, central banks collectively purchased 244 tons of gold in Q1 2026, a 3% year-on-year increase, exceeding the five-year average.
A more critical change is that the entities purchasing gold are expanding from a few major powers to more emerging markets, including countries like the Czech Republic and Poland, which have recently disclosed gold purchase activities. Central bank gold purchases represent the strongest long-term demand signal and indicate that official trust in US dollar assets is declining among nations, with gold's status as the "ultimate reserve asset" regaining prominence.
From a medium- to long-term perspective, the price center for precious metals has a foundation for sustained upward movement. On one hand, the center of geopolitical risk is elevated, and the restructuring of the global political and economic order continues. On the other hand, market concerns about US fiscal sustainability persist and are intensifying, while the Federal Reserve's independence faces questioning. Therefore, the de-dollarization process will continue to advance, and the trend of global central banks increasing gold reserves will persist.
From a longer-term trend perspective, the core logic for the precious metals sector, led by gold, lies in investor demand for diversified asset allocation. Against the backdrop of a reshaping global monetary system, gold, as the most important alternative asset, has its allocation value widely recognized by central banks and financial institutions globally. The core logics of "de-dollarization" and the prolonged nature of geopolitical conflicts continue to strengthen amidst increasing overseas uncertainties.
Looking ahead, the US-Iran game is highly repetitive, with frequent shifts in news-driven sentiment between bullish and bearish factors. Precious metals are unlikely to develop a clear trend in the short term, with two-way broad fluctuations remaining the main theme.
In contrast to gold price movements, copper prices have maintained an upward momentum recently.
The recent upward momentum in copper prices is primarily driven by expectations of supply shortages. Specifically, current supply pressures mainly stem from slower-than-expected progress in copper mine restarts, risks of energy consumption restrictions in some regions, and expectations of contraction in overseas hydrometallurgical copper smelting capacity. Multiple factors have jointly heightened market concerns about copper supply shortages.
On one hand, the stalemate in the Middle East situation and issues related to the Strait of Hormuz have limited sulfuric acid import supplies to Africa, directly pushing the landed price of African sulfur and sulfuric acid above $1000 per ton. Coupled with soaring international oil prices driving up diesel costs, the production cost for hydrometallurgical copper plants reliant on sulfuric acid has increased by approximately 49% compared to last year, based on smelting process cost calculations. African smelters face triple pressures of rising costs, tight sulfur/sulfuric acid inventories, and critically low diesel product inventories, posing significant risks of capacity contraction.
"On the other hand, Freeport has revised down its restart plan for Indonesian copper mines, expecting to recover only to 65% capacity (previously estimated at around 85%) by the second half of this year, with full production restart delayed from 2027 to early 2028, intensifying the contradiction of tight copper ore supply."
Meanwhile, Peru issued an energy crisis emergency decree on the evening of May 11 local time, impacting global copper supply expectations and becoming the trigger for sustained copper price increases that evening. The decree aims to address domestic energy supply shortages in Peru, prioritizing residential electricity supply, while industrial electricity for mines and other sectors faces power restriction risks, directly boosting copper futures.
From the demand side, demand expectations for copper provide price elasticity. This includes the global construction of new power systems and the continued expansion of AI investment capital expenditure by overseas tech giants. The growth space for copper consumption further establishes the stability of its high price center.
Goldman Sachs also expressed optimistic expectations for subsequent copper demand in its latest report, stating that since 2011, the growth in global copper demand measured in tons has exceeded the growth in global real GDP by more than 20%.
Domestic demand in China is gradually approaching the end of its peak season, but long-term demand from sectors like power grids remains resilient. Furthermore, copper inventories are still in a trend of continuous destocking. As of May 11, Chinese electrolytic copper inventories stood at 242,600 tons, resuming destocking. The current copper market presents a fundamentally bullish picture of constrained supply and resilient demand.
Looking ahead, intensified copper ore tightness, the trend of overseas smelting contraction, and resilient demand support provide structural support for the commodity, suggesting copper prices may operate at high levels. However, on a macro level, the focus remains on geopolitical conflicts, and the liquidity environment remains constrained. The macro environment does not currently provide strong momentum for copper prices, reducing the potential for significant upward movement. If macro risks weaken or clear, it could further open up space for price increases.
The medium- to long-term bullish case for copper is relatively clear and will support copper prices in operating at high levels with a stronger bias amid fluctuations. However, the volatility of the Middle East situation remains a focal point for market speculation. Medium- to long-term copper prices are expected to demonstrate the long-term allocation value of strategic resources amidst intensified geopolitical changes and supply chain restructuring. Copper prices are anticipated to reach new highs within the year.
Comments