Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / How Copper Is Outperforming Gold in July 2026
Transcript
- Lucas: Gold is sitting comfortably above four thousand dollars an ounce. That's the number everyone sees. But if you look at what's happening underneath, the real story this week might be copper. Luna: Copper at six thirteen a pound — up half a percent over five days. Not flashy, but it's holding its ground while a lot of other risk assets are wobbling. Lucas: Right. And context matters here. We've got crude oil down almost four percent in the same window. Cotton and coffee are surging, but that's weather and supply shocks. Copper is the one that's supposed to tell you about the real economy — the wires, the pipes, the construction, the EV motors. Luna: So when copper holds above six dollars while the S&P energy sector drops two and a half percent, what's the market trying to say? Lucas: I think it's saying that the industrial demand story isn't dead yet. Look, the CPI reading for May came in at 334, up from 332.4. Core CPI at 336.1. Inflation is sticky but not accelerating. The ten-year breakeven rate is 2.23 — basically unchanged. So the macro picture is: inflation is settling, not spiking, and the Fed doesn't need to panic. Luna: And a non-panicking Fed is good for rate-sensitive industrial demand. If they hold steady, borrowing for big capital projects stays predictable. Lucas: Exactly. And copper is the raw material for those projects. The energy transition alone — every new wind turbine, every grid upgrade, every EV charging station — it all needs copper. The International Energy Forum estimates that by 2030, the world will need to double copper production just to meet climate targets. We're not doubling anything. We're barely growing supply. Luna: So demand is structurally higher while supply is constrained. That's the textbook recipe for a commodity to hold up even when the broader market is nervous. Lucas: And you're seeing that play out. Copper is at six thirteen. That's down from the highs earlier in the year but it's up from four seventy-five a year ago. That's a nearly thirty percent gain in twelve months. Gold has done well too, but gold's move is more about central bank buying and geopolitical fear. Copper is about actual industrial activity. Luna: Speaking of geopolitical fear — the headlines this morning are pretty stark. Russia launched a massive strike on Ukraine, Poland scrambled jets, Finland restricted airspace. That usually sends people into gold. But copper didn't sell off. It's up. Lucas: That's the interesting part. Usually when you get a risk-off event like that, both gold and copper might rally initially — gold as a safe haven, copper on supply disruption fears. But this week, the supply side isn't the story. Copper production in Chile and Peru hasn't been interrupted. The rally in copper is coming from demand expectations. Luna: And specifically from China? Because the headlines about Chinese stimulus have been building. Lucas: China is the biggest copper consumer in the world — about fifty-five percent of global demand. And in the last few weeks, there have been signals that Beijing is preparing another round of fiscal support. Not the massive stimulus of 2024, but targeted spending on grid infrastructure and electric vehicles. That's a copper-intensive program. Luna: So copper is basically front-running that stimulus? Expecting it before it's fully announced? Lucas: In a way. But it's also pricing in something else: the M&A boom. There was a headline today from Citi's UK CEO saying M&A is 'on fire' as large-cap firms simplify. When companies simplify — spinning off divisions, selling non-core assets — they often liquefy their balance sheets. That cash has to go somewhere. Some of it goes into capital expenditure, some into share buybacks. But the net effect for copper is that industrial companies have more firepower to invest in plants and equipment. Luna: That's a connection I hadn't made. So the M&A wave could be indirectly supporting industrial metals demand? Lucas: It's plausible. Not the main driver, but a tailwind. The bigger picture is that copper is behaving like a growth asset, not a fear asset. And that's a useful signal when the macro environment is as ambiguous as it is in July 2026. Luna: Speaking of the macro, the ten-year breakeven inflation rate dipped to 2.23. That's down from 2.24 the previous day. Essentially flat. Inflation expectations are well anchored. Lucas: That's the Fed's dream scenario. Not too hot, not too cold. And it means the real yield on Treasuries is still positive if you account for inflation. That usually drains money from gold, because gold pays no yield. But gold is up. So something else is supporting it. Luna: Central bank buying is the usual suspect. The People's Bank of China and other emerging market central banks have been accumulating gold for two years now. They're diversifying away from the dollar. Lucas: Right. But that's a structural trend, not a tactical trade. The tactical question for a listener today is: if you're looking at commodities, does copper make more sense than gold right now? Luna: And what would you say? Lucas: I'd say it depends on your time horizon and your risk tolerance. Gold is the insurance policy. It's boring, it's liquid, it's been through wars and inflations. Copper is the growth bet. It's more cyclical, more volatile. But the supply-demand setup for copper is genuinely compelling. Luna: And you can access it via futures, ETFs, or even mining stocks. The XLE energy ETF is down two and a half percent this week, but the broader materials sector might be a different story. Lucas: It's worth noting that some of the big diversified miners — companies that produce copper along with iron ore and other metals — have been outperforming. If you believe the energy transition is real and China's stimulus will hit, copper should benefit. Luna: Let's talk about the other side. What could break this copper narrative? Lucas: A sharp global recession. If the U.S. economy really slows and China's property crisis deepens again, copper could drop twenty percent quickly. It's not a risk-free trade. But the data right now doesn't scream recession. Jobless claims are still low, consumer spending is okay, and the services PMIs are in expansion territory. Luna: You know, I'm thinking about something you said earlier — about how a handful of listeners keep this show going. And it's true. We don't run ads, we don't have a big corporate parent. It's just us and the audience. Lucas: If walking through the economy with us has made something click — maybe it's understanding why copper is diverging from gold, or how the M&A boom connects to commodity demand — that's exactly the kind of clarity we're trying to provide every day. Luna: And a small group of listeners already chips in monthly through Buy Me a Coffee dot com slash fexingo. That's what funds making this many episodes possible. No ads, no sponsors, just listener support. Lucas: Yeah. So if our breakdown of copper versus gold has been useful, and you want to see more like it, that's the place. No pressure, just honest appreciation. Luna: Back to copper. You mentioned that the demand story from China isn't the only game in town. What about the rest of the world? Lucas: India is the wildcard. India's per capita copper consumption is still tiny compared to China's. But with their infrastructure push and electrification drive, they could add significant demand in the second half of this decade. The IMF projects India will be the fastest-growing major economy through 2028. Luna: And then there's the U.S. — the Inflation Reduction Act and the CHIPS Act are both driving copper demand for renewable energy and semiconductor fabs. Lucas: Exactly. So we have three big demand engines: China's stimulus, India's growth, and the U.S. industrial policy. And on the supply side, we have declining ore grades at existing mines and a lack of new greenfield projects. The average copper mine now takes over fifteen years from discovery to production. Luna: That's a recipe for higher prices over time. But near-term, copper could still get whipsawed by macro headlines. Lucas: For sure. If the chip rout that's hitting Samsung and SK Hynix today spreads to the broader tech sector, that could create a risk-off wave that drags all commodities down temporarily. But the structural story remains intact. Luna: So what's the one thing you want listeners to take away from this episode? Lucas: That copper at six dollars is telling you something different than gold at four thousand. Gold is looking backward — at inflation, at central bank buying, at geopolitical fear. Copper is looking forward — at industrial demand, at energy transition spending, at the real economy's pulse. And right now, the forward-looking signal is more optimistic than the backward-looking one. Luna: That's a good note to end on. We'll keep watching the copper-gold spread and bring you the next signal when it shifts. Lucas: Thanks for being here. We'll talk to you next time.