Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Copper Breaks Out as Oil and Gold Stagnate in July 2026
Transcript
- Lucas: So copper hit six dollars and twenty-eight cents a pound this week — that's up nearly two percent in five days, and it's now sitting at levels we haven't seen since early 2024. Luna: And that's happening while oil and gold are basically treading water. Brent crude's up a bit, but gold's actually down a fraction. What's driving copper here? Lucas: That's the question, right? Because if you look at the macro picture, it's not screaming 'risk on.' Core CPI came in at 336.1 for May — that's up from 335.4 in April. Inflation is sticky. The ten-year breakeven ticked up to 2.24 percent. So the case for higher for longer rates is still very much alive. Luna: Which normally would be a headwind for industrial metals. Higher rates mean higher cost of carry for holding physical inventory, and it typically cools demand expectations. Lucas: Exactly. So the fact that copper is rallying through that tells me something else is going on. The most common explanation I'm hearing is supply constraints meeting early-stage re-stocking. There's a narrative that global manufacturing might be bottoming, and copper buyers are getting ahead of that. But I'm not fully convinced yet. Luna: What's your skepticism based on? The data? Lucas: Partly. The S&P Global manufacturing PMI for the US was still below 50 in June. And China's property sector remains a drag. So if this is a genuine demand-led rally, we'd expect to see more confirmation from actual industrial output numbers. What we have instead is a lot of talk about 'green capex' and 'grid buildout' — which is real, but it's a slow burn, not a sudden spike. Luna: So you're leaning toward the supply story? Because we know copper mine supply has been constrained. The Codelco output issues, the delays at Rio Tinto's Resolution project in Arizona — there's a structural deficit narrative that's been building for a couple of years now. Lucas: Right. And that narrative tends to attract speculative money, especially when other asset classes look uncertain. You've got gold at four thousand one hundred fourteen dollars — that's a big number, but it's basically flat over the last week. Silver's actually down a bit. So maybe some of the money that was flowing into precious metals is rotating into copper as a 'metals trade' with more upside. Luna: Interesting. So it's not just about copper itself — it's about copper's role in the commodity complex right now. It's become the go-to for anyone who wants exposure to raw materials but thinks gold is fully priced and energy is too geopolitical. Lucas: Exactly. And on that geopolitical front, you can't ignore what's happening in the Strait of Hormuz. The US and Iran traded airstrikes again this weekend. Brent crude is up two and a half percent in the last five days, but it's still only at seventy-six dollars. That's actually a pretty muted response for that kind of headline risk. Luna: Which tells you the market thinks either the conflict stays contained, or there's enough spare capacity from other producers to fill any gap. Saudi Arabia has room to ramp up. And US shale, while not growing as fast as it was a few years ago, is still producing at record levels. Lucas: Right. So oil is essentially anchored by that reality. But copper isn't. Copper's supply constraints are more structural — you can't just turn on a tap and produce more copper. A new mine takes a decade to develop. So when you combine that with any hint of demand recovery, prices can move quickly. Luna: And we saw that in the data this week. The five-day move in copper was one point eight percent. That's not a blow-off top — that's a steady grind higher. It feels like accumulation, not speculation. Lucas: I think that's a fair read. But I want to push back gently: if you look at the Commitment of Traders report from last week, managed money net long positions in copper are at their highest since March. So there is speculative length building. The question is whether that's leading or following the physical market. Luna: Leading, probably. Speculators tend to front-run expected physical tightness. But if the physical market doesn't deliver the tightness — if, say, China's economy slows further or the grid buildout hits permitting delays — then you could see a sharp reversal. Lucas: That's the risk. And that's why I think the next few weeks are crucial. We've got earnings season kicking off — JPMorgan, Netflix on deck. But more importantly for commodities, we'll get industrial production data from China and the US later this month. If those numbers confirm the bottoming narrative, copper could have another leg up. If they disappoint, we might see a pullback to five eighty or so. Luna: Before we get too deep into the forecasts — and I know you love those — I want to circle back to something you said about the macro backdrop. Because if copper is rallying despite sticky inflation and high rates, what does that tell us about the broader economy? Lucas: It tells us that markets are pricing in a soft landing with a twist. The twist is that the landing might be uneven across sectors. Services are slowing, but goods — especially those tied to construction and electrification — might be stabilizing. Copper is the canary in that coal mine. Luna: And historically, copper rallies before recessions end, not during them. So if this rally persists, it could be an early signal that the worst of the manufacturing downturn is behind us. Lucas: Exactly. The copper-bottom call is a classic leading indicator. But it's not infallible. In 2015, copper rallied in the first half of the year only to collapse in the second half as China's slowdown became more pronounced. So we need to watch the data, not just the price. Luna: Speaking of watching the data — Lucas, you and I talk about these connections every day on this show, and a lot of listeners tell us it helps them make sense of the headlines. If that's you, and you find value in what we do here, there's a small way to support the show and keep it ad-free. It's not required, but it helps us keep doing what we do. Lucas: Yeah, it's at buy me a coffee dot com slash fexingo. That's it. No pressure, no perks — just a way for listeners who get something out of the show to chip in. We appreciate every single one. Luna: And we mean that. Now back to copper — because I want to get your take on what levels you're watching this week. Lucas: Sure. On the upside, I think six fifty is the next psychological resistance. That's where we saw selling pressure back in January 2024. On the downside, six dollars is the key support level. If we break below that, the rally is probably over for now. Luna: And what's your base case? Are you bullish, bearish, or just confused? Lucas: I'd say cautiously constructive. I think the supply story is real, but the demand story needs more proof. So I'd expect copper to trade in a range between six and six fifty for the next month or so, with a bias toward the upper end if the data cooperates. Luna: That's a reasonable call. And it gives listeners something to watch: the industrial production numbers, especially from China. If they surprise to the upside, that range breaks higher. Lucas: Exactly. And on the geopolitical side, keep an eye on the Strait of Hormuz situation. If that escalates in a way that disrupts oil flows meaningfully, it could spill over into copper sentiment — not through direct supply, but through risk-off positioning that hits all commodities. Luna: So copper is the headline, but the subtext is all about cross-asset correlations. That's what makes this market so interesting right now. Lucas: Absolutely. And we'll be watching it every day. Thanks for listening, and we'll see you next time on The Commodities Economy.