Gold and Copper Surge Together: The Macro Logic Behind Commodity Divergence and Fed Policy Impact

Gold and Copper Surge Together: The Macro Logic Behind Commodity Divergence

Recent global commodity markets have shown a rare "dual-engine" pattern: gold and copper prices rising in tandem, while other industrial metals and energy commodities diverge. Behind this phenomenon lies a complex interplay between risk aversion and industrial demand expectations, reflecting a deep repricing of the Federal Reserve's policy path.

Gold: Strengthening and Reshaping Safe-Haven Logic

Gold, as a traditional safe-haven asset, has sustained price support in 2024. According to the World Gold Council, global central bank gold purchases remained at historically high levels in the third quarter of 2024, driven by geopolitical risks and de-dollarization trends. Meanwhile, while U.S. inflation data has eased, core services price stickiness has exceeded expectations, leading to volatility in market expectations for the Fed's rate-cutting pace. This uncertainty has actually reinforced gold's safe-haven appeal—when markets diverge on the rate path, gold, as an asset with "no sovereign credit risk," often attracts capital inflows.

Notably, the traditional negative correlation between gold and U.S. real interest rates has weakened recently. According to the Fed's statements, while real rates remain in positive territory, markets are increasingly focused on fiscal deficit expansion and debt sustainability issues, prompting some investors to view gold as a hedge against "monetary system stability." Additionally, Bitcoin's surge past $100,000 in 2024 has siphoned off some risk-on capital, but institutional demand for gold remains robust.

Copper: "Temperature Differences" in Industrial Demand Expectations

Unlike gold's safe-haven attributes, copper's price rise more reflects structural optimism about industrial demand. According to the International Copper Study Group (ICSG), the global refined copper market is expected to see a small supply deficit in 2024, primarily due to declining ore grades in major producing countries like Chile and Peru, and slower-than-expected new capacity additions. On the demand side, China's copper consumption remains resilient in power infrastructure, new energy vehicles, and photovoltaic sectors, while clean energy investments spurred by the U.S. Inflation Reduction Act have boosted long-term demand expectations.

However, behind the synchronized rise of copper and gold, there are clear "temperature differences." Eurozone manufacturing PMIs remain in contraction territory, and industrial activity in some Asian emerging markets shows signs of slowing. This suggests that copper's price increase is not based on a broad recovery but is driven by "green transition" and "supply constraints" structural factors. According to Goldman Sachs research, the long-term demand growth story for copper remains intact, but short-term price volatility may increase.

Fed Policy Expectations: The Divergence "Baton"

The Federal Reserve's monetary policy expectations are key to understanding the synchronicity of gold and copper. On one hand, delayed expectations for rate cuts push up real rates, theoretically negative for gold; on the other hand, expectations of an upcoming rate-cutting cycle could stimulate a soft landing, benefiting industrial metals like copper. This contradiction is particularly evident in recent data: U.S. nonfarm payrolls exceeded expectations, but consumer confidence weakened, fueling discussions about "stagflation" risks.

In derivatives markets, speculative net long positions in gold futures declined in the fourth quarter of 2024, while copper futures' forward curve shows a backwardation structure with near-term strength and long-term weakness, indicating spot tightness alongside uncertainty about future demand. According to CFTC positioning reports, hedge fund allocations in gold and copper have diverged: gold longs are more concentrated in long-term positions, while copper sees more speculative trading activity.

The Macro Logic Behind Divergence

The simultaneous rise of gold and copper essentially reflects market pricing of "uncertainty": gold prices geopolitical, monetary system, and fiscal risks; copper prices green transition, supply constraints, and structural demand. Under the "baton" of Fed policy expectations, they exhibit short-term resonance but long-term divergence in logic.

Looking ahead, if the U.S. economy achieves a soft landing with inflation steadily declining, copper could benefit from industrial demand recovery, while gold's safe-haven premium may gradually fade. Conversely, if the economy slips into recession or geopolitical risks escalate, gold will again become a capital safe haven, while copper faces demand downside pressure. Investors should closely monitor the Fed's December FOMC meeting dot plot and economic projections, as well as the pace of China's fiscal stimulus implementation, as these factors will determine the next direction of commodity divergence.