Roundtable, Interview
Copper: AI Hype or Supply Squeeze?
- Copper demand from AI data centers is expected to drive material price increases within one to two years due to anticipated deficits, though this outlook faces uncertainty from current inventory levels and skepticism regarding conviction in the thesis.
- U.S. physical copper stockpiles are accumulating at unprecedented 20-year highs as metal relocates from the East to avoid potential tariff announcements expected by the end of June, which may tighten the ex-U.S. market while creating a risk of a 10%+ price decline if tariffs fail to materialize.
- Aluminum prices are projected to rise approximately 10% to test the $4,000 level over the next three to six months, driven by an immediate physical deficit from Middle Eastern smelter outages expected to persist until at least year-end, with some restarts delayed up to 12 months.
- The aluminum market is forecast to transition from a deficit to a rapid surplus by the first half of next year due to new Indonesian supply and the resumption of Middle Eastern production, causing current steep backwardation in time spreads to revert to a carry structure.
- Gold faces a conflicting environment where a rally could theoretically reach $6,000 by year-end, yet persistent inflation from AI CapEx, energy, and food costs is expected to push nominal and real rates higher, creating a difficult backdrop for new highs and rendering the $6,000 target challenging.
- Silver is anticipated to remain closely correlated with gold and is not expected to exceed $100 this year, as the "investor euphoria" of January is viewed as unsustainable and limits its ability to significantly outperform gold.
- Potential oil revenue losses from the Iran conflict may reduce dollar recycling flows into U.S. treasuries and gold from Middle Eastern nations, adding to the macroeconomic complexity for precious metals.