By Martin Baccardax

Copper is a bet on a growing economy, while gold is a defensive play. Guess which metal is hotter right now.

Gold hit a fresh all-time high again Tuesday, extending the precious metal's impressive rally to around 40% this year, as markets continue to digest data that suggests stagflation risks to the world's largest economy.

Meanwhile, the stock market is focused on a $53 billion merger between Anglo American and Teck Resources that would create the world's third-largest copper-mining company. It's a bet that long-term demand for the metal will remain strong.

Copper is often described as the metal with a PhD in economics, as its prices reflect global demand for construction and expansion across a host of sectors and countries. It is increasingly seen as a key element in the artificial intelligence investment boom and the electrical infrastructure needed to power the news technology.

"Copper is at the epicenter of the energy transition, which means that the lack of mine supply growth is being felt acutely," said Bank of America analysts led by Jason Fairclough in a recent sector note.

"Tight concentrates availability is increasingly capping production [in China] potentially pushing consumers of refined metal back into international markets," the team added.

That, to some degree, explains the motivation behind the Anglo/Teck merger, which will house assets in Chile, Peru, Canada, and the U.S.

But the metal has also been sensitive to President Donald Trump's tariff regime. Prices surged to record highs in early July when the president suggested he was considering a 50% levy on copper imports, only to fall hard later that month when the plans were watered down to include only finished pipes and wiring.

That leaves U.S. copper futures prices up just 13% on the year at $4.51 per pound, less than a third of the pace that gold has risen over the same period.

There's some logic to that.

Copper gains when investors see industrial expansion, gold when policies suggest either muted growth or quickening inflation.

Lately, of course, gold investors are worried about both.

The Bureau of Labor Statistics overhauled its estimate for hiring gains over the 12 months ending in March on Tuesday, and loped 911,000 jobs from its previous tally. That reduces the average monthly gain from around 147,000 to just 71,000, according to Bradley Saunders at Capital Economics.

Jobs gains and economic growth go hand in hand, so this broad reset of labor market strength is likely to trigger a series of GDP forecast changes from analysts on Wall Street.

Thursday's August inflation report, meanwhile, is expected to show consumer prices pressures ticking higher once gain, thanks in part to tariff-related price increases. That is likely to put the Federal Reserve in the difficult position of having to focus on a weakening labor market while inflation ticks higher.

Gold prices have reflected that stagflation dilemma, and have risen more than 7% over the past month alone. The metal was last changing hands at $3648 an ounce. Copper, meanwhile, is largely flat to early August levels.

And demand isn't slowing down.

Ole Hansen, head of commodity strategy at Saxo Bank, notes that nearly half of all the commodity market exposure from managed money investors is tied to gold, which he says "underscores the strength of a rally that has persisted for months."

He also cautioned that record U.S. stockpiles of copper, tied to the early summer rally, could soon be unwound.

"Given that the U.S. accounts for only around 6% of global demand, the tariff-driven flows risk reversing, potentially adding supply back into the global market where London sets the benchmark price," Hansen said.

Gold, on the other hand, is set to ride the wave of rising Fed rate cut bets, broader dollar weakness, and concerns tied to central bank independence.

"Global central banks have slowed their gold purchases as prices have hit record highs, but ongoing geopolitical tensions are expected to sustain demand," said ING's commodities strategist Ewa Manthey.

Meanwhile, "monetary policy expectations are now likely to become the primary driver for gold's direction," she added.

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

September 09, 2025 16:15 ET (20:15 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.