Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Gold Is Falling While Copper Rises in July 2026
Transcript
- Lucas: Gold is down more than one percent over the past five trading sessions, sitting near four thousand sixty dollars an ounce. Copper, by contrast, is up two point four percent, at six dollars thirty-eight cents a pound. Luna: That's a pretty sharp divergence. Gold and copper usually move together when the macro story is about broad-based demand or inflation. Lucas: Right. And what's interesting is that this split is happening while crude oil is up over twelve percent in five days, and grains like wheat and corn are both up more than seven percent. So it's not a commodity-wide selloff — it's a gold-specific story. Luna: So what's driving gold lower while everything else rallies? Lucas: The simplest explanation is real yields. The ten-year breakeven inflation rate — that's the market's expectation for average inflation over the next decade — ticked down to two point two five percent. That's a tiny move, but it's happening at the same time nominal yields are holding steady or creeping up. So real rates are edging higher. Lucas: Gold has no yield. When real yields rise, the opportunity cost of holding gold goes up. Investors can get a better risk-free return elsewhere. That dynamic has been the dominant driver of gold for the past few years. Luna: And copper is responding to different signals. Even if inflation expectations are easing a bit, industrial demand — especially from energy transition and AI data center buildout — is still strong. Plus there are supply constraints from mines in Chile and Peru. Lucas: Exactly. Copper has a physical demand story that gold doesn't. Gold is purely a monetary and store of value asset. So copper can rally even when real yields rise, as long as the demand outlook is robust. Luna: Speaking of support — we keep this show completely ad-free, and listener support is what makes that possible. If walking through the economy with us has made something click, or if you just appreciate not having commercials interrupt the analysis, you can find the link at buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a small way to keep the show independent. We don't run ads, we don't do sponsorships, and that's a choice we made because we think the content is better for it. So if you're in a position to contribute, it really helps. Luna: Alright, back to gold. So what's the bear case for gold here? Could real yields keep rising? Lucas: Possibly. CPI data from June came in at three hundred thirty-two point six, which is down from three hundred thirty-four in May. Core CPI is basically flat. So the inflation prints are moderating. If the Fed feels comfortable holding rates higher for longer, or even hinting at a cut later this year, nominal yields could fall and real yields would drop, which would be bullish for gold. Luna: But if inflation stays sticky and the Fed doesn't cut, then real yields stay elevated and gold could drift lower. Lucas: Right. The market is pricing in a soft landing — inflation coming down without a recession. That's actually a pretty bad environment for gold historically. Gold does best during crises, high inflation, or when central banks are aggressively cutting rates. Luna: So the current setup is almost the opposite of that. Gold is being treated as a risk-off asset, but risk appetite seems to be returning — stocks are up today, oil is surging, copper is strong. Lucas: And there's another layer: the dollar. Gold is priced in dollars, so a stronger dollar typically weighs on gold. The dollar index has been firm this week, partly because of the geopolitical tensions in the Middle East — the Strait of Hormuz situation is pushing oil higher and driving safe-haven flows into the dollar, not into gold. Luna: That's a key point. Usually gold and the dollar move inversely, but this week both gold and the dollar are moving? Actually, gold is down, dollar is up. So the traditional relationship holds. Lucas: It does. But what's interesting is that gold isn't benefiting from the safe-haven bid. Investors are choosing the dollar and Treasuries instead. Gold's role as a safe haven has been questioned before, especially when real yields are competing. Luna: So where do you see gold going from here? Four thousand sixty feels like a key level. Lucas: It is. If gold breaks below four thousand, that could trigger some technical selling. But the bigger picture is that gold is still up significantly from a year ago. It's not in a bear market. It's just consolidating. Lucas: I think the next big catalyst will be the Fed's July meeting. If Chair Warsh signals that a rate cut is coming, gold could rip higher. If he stays hawkish, gold could test four thousand. Luna: And copper? Is that a buy here at six thirty-eight? Lucas: Copper's story is structural. Demand from electrification and AI data centers is real and growing. Supply is constrained — miners haven't invested enough in new capacity. So even if global growth slows a bit, copper has support. I think it's a more straightforward bull case than gold right now. Luna: So the takeaway for listeners might be: if you're bullish on commodities, copper and energy might be the better bet over gold in this environment. Lucas: I'd agree with that. Gold isn't broken, but the macro tailwinds from earlier this year — falling real rates, a weaker dollar, inflation fears — those have faded. Until they return, copper and crude are where the momentum is. Luna: Alright, let's keep an eye on those real yields and the Fed. Thanks, Lucas. Lucas: Thanks, Luna.