With all the emphasis on investing in gold given the yellow metal’s surge in recent months, it can be tempting to overlook its more industrial cousins.
Gold investing is all the rage, with the yellow metal surging as investors look to hedge themselves against disruption in the equity markets or inflation that could result from Trump’s tariff regime.
However, investors taking a longer term perspective might want to consider investing in copper, alongside gold or other commodities.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“Many people expect strong growth [in copper demand] driven by the green energy transition, turning from typical combustion engines to electric vehicles, as the world moves away from fossil fuels towards more renewable power generation,” Duncan Hobbs, research director at Concord Resources, tells MoneyWeek.
“Electricity demand is expected to increase about 169% through 2050,” says Steven Schoffstall, director, ETF product management at Sprott Asset Management. “As demand is expected to move higher, there are some headwinds to increasing supply at the same rate. Ore grades are declining and are a fraction of what they have been historically.”
Given copper’s unique physical properties (it is the best conductor of heat and electricity in industrial use), the copper market is often viewed as a bellwether for the global economy.
Is it worth investing in copper? And how can you gain exposure if so?
Which factors impact copper prices?
According to Hobbs, there are three main influences on copper prices.
The first is the “fundamental status”: the balance between physical copper supply and demand. Naturally, if demand outstrips supply, this acts to increase copper prices, and vice versa.
The second factor is influenced by this and pertains to broader macroeconomic environments. We’ll explore this more below, but major macroeconomic news stories like the tariff toing and froing falls under this category.
“You can sometimes get a situation where the fundamental assessment of the supply and demand balance would lead you to expect prices to trade in one direction, but broader macroeconomic and political considerations push prices in another direction,” explains Hobbs. For that reason, he says, the fundamental balance has to be layered with the macroeconomic outlook.
The third factor influences short-term copper prices, over weeks and months rather than years and decades. That is financial positioning: effectively, a consideration of how copper market participants have deployed money.
If investors generally expect copper prices to rise in future, they will build long positions, often in futures markets. If the hypothesis is correct and copper prices rise, they will naturally want to take some profit. That can lead to short-term periods where the price of copper falls, even against a longer-term trend of rising prices.
Similar dynamics to this third effect also play out in equities markets.
How have tariffs impacted the copper price?
As of today (20 May) copper spot prices are around $4.55 per pound.
Though, they’ve had a volatile couple of months. On 26 March, copper prices peaked at $5.24 – the highest that copper prices have ever been.
By 8 April, they had fallen around 22% to $4.10, before recovering by 11% between then and now to reach their current level.
Those swings correspond fairly neatly to the impact of Donald Trump’s ‘Liberation Day’ tariffs.
Copper prices have risen over recent years as demand for copper grew with the global economy. The prospect of the US administration hitting copper imports with tariffs – as they did with aluminium and steel – prompted a flurry of buying ahead of Liberation Day, elevating copper prices.
“Copper was being sent to the U.S. ahead of expected tariffs, and many believe that copper to be effectively off the market as it is unlikely to flow out of the United States,” says Schoffstall. “Scrap copper has also been impacted by tariffs and that’s having an impact on available supply as recycled copper has been a major part of the global supply chain for decades.”
Specific tariffs on copper have not yet been announced, but it is expected that Trump’s review will conclude that there is a legal justification to impose tariffs on copper imports on the basis of national security.
When the (more general) reciprocal tariffs were announced, they were in fact far steeper and more widespread than the world had expected, prompting fears of a global slowdown. That pushed the copper price to its 8 April lows; less global economic activity basically implies weaker demand for copper.
Since then, the gradual unwinding of most reciprocal tariffs has seen copper prices recover. However, a reversal of Trump’s tariff pause, or the imposition of specific tariffs on copper, could complicate the picture.
A slowdown or recession in the US would lower copper prices (lower growth means less demand for electric goods means less demand for copper).
Can copper supply keep up with demand?
The price of copper, like any commodity, is determined by supply and demand.
Many analysts and economists predict a copper supply shortfall. While demand for copper is expected to increase, particularly as the energy transition gathers momentum, production is struggling to keep pace.
“Declining ore grades, especially in Chile, along with rising extraction costs and long project development timelines, are making it increasingly difficult to expand output quickly,” says Lale Akoner, global market analyst at eToro. “BHP (LON:BHP) and others have warned that nearly half of today’s copper production could be at risk over the next decade if investment fails to ramp up.
“Some analysts are already predicting supply deficits could emerge as early as this year, hence the urgent need for new capital and development in the sector,” adds Akoner.
Hobbs, though, believes that talk of a copper supply crunch may be overblown. The dramatic versions of this narrative overlook how much copper demand could be diverted towards other metals.
All sorts of fixtures and fittings, for example, could be made out of copper alloys, he says. While these do a good job, they are expensive (increasingly so as the balance of copper supply and demand tightens), without making use of copper’s key advantages as a conductor of electricity and heat.
“In the years to come, the use of copper will be increasingly focused on those applications in which copper’s critical properties as the best conductor of heating and electricity (among major industrial metals) are at a real premium,” says Hobbs.
How to invest in copper
There are several ways to invest in copper. Many professional copper traders will buy and sell futures contracts; however, that’s not generally recommended for retail investors as it is risky and involves a degree of speculation.
You can easily gain exposure to copper spot price movements with an exchange-traded commodity (ETC), though. An ETC is like an ETF, but rather than an index it tracks the price of one particular commodity.
“These are ideal for investors seeking pure-play exposure to the metal itself, without the added exposure of mining company performance,” says Akoner.
One example is WisdomTree Copper (LON:COPA). This London-listed ETC tracks the dollar price of copper. In the year to 16 May COPA has gained a little over 13%.
You can also invest in copper mining ETFs. Like most ETFs these are bundles of stocks: the stocks will be those of copper mining companies.
One example is the Sprott Copper Miners UCITS ETF (LON:COPP). This ETF provides exposure to small-, mid- and large-cap copper miners.
“These funds tend to amplify movements in copper prices through equity exposure, potentially delivering higher returns (and risks) than the metal alone,” says Akoner.
Investors could also buy the shares of copper miners directly. Some major FTSE 100 companies like Antofagasta (LON:ANTO), Glencore (LON:GLEN) or Rio Tinto (LON:RIO) have large exposure to copper mining. Like copper mining ETFs buying these shares could amplify risks and returns compared to investing in copper ETCs (with less diversification to mitigate this risk and reward compared to buying a copper mining ETF).
“Finally, diversified commodity funds and investment trusts, such as BlackRock World Mining Trust (LON:BRWM) or JPM Natural Resources Fund can provide broader exposure,” says Akoner. “These vehicles typically hold positions across multiple metals and mining companies, including those focused on copper, making them a useful option for investors seeking a more balanced approach.”
-
Starling Bank to use AI to help you with your money - how will it work?Starling Bank is using AI to show customers how their daily spending is impacting their bank balance, we analyse if the tool is offering anything new and if it can improve your finances.
-
From old clocks to vintage dolls worth thousands – are you sitting on a fortune in your attic?Many of us are guilty of hoarding things in the loft, but, from coins and vintage jewellery to war memorabilia, your attic could hold items worth thousands of pounds. We look at how much they could sell for
