How should we view the persistence of the gold-copper-oil resonance?

Gold, copper, and crude oil have seen a rare simultaneous rise. Since the end of June, the maximum gains for the three have reached 17%, 9%, and 30%, respectively. Gold prices touched $4,700 per ounce in late August, Brent crude returned to around $90 per barrel, and copper prices approached their historical highs.

A report released on August 26 by the macro team at Soochow Securities pointed out that this round of market rally is not simply a general rise in commodities, but rather the result of multiple factors, including increased geopolitical risk premiums, a temporary improvement in overseas liquidity, heightened fragility of global supply chains, and weakening of the US dollar's creditworthiness . Since the end of July, the strong foundation of the US dollar has weakened temporarily, providing a shared macroeconomic environment for the rise in gold and commodity prices.

However, the core drivers behind the rise in the three major assets are different: gold is mainly supported by concerns about the sustainability of US fiscal policy, de-dollarization, and central bank gold purchases; copper prices have risen by about 15% since the beginning of the year, driven by expectations of US tariffs, supply constraints at the mining end, and demand from AI, new energy, and other sectors; while crude oil is supported by the fluctuating US-Iran situation, obstructed passage through the Strait of Hormuz, and low global inventories.

Looking ahead, the report remains optimistic about the three major assets: gold could reach $5,000/ounce in an optimistic scenario; copper prices are already close to their historical highs and are unlikely to see a deep correction before the US tariff policy is implemented; as for crude oil, low inventories and limited supply will continue to provide support, and if the stalemate in the Middle East continues, Brent crude oil prices may remain at $80-90/barrel.

Why are the three major asset classes rising in tandem?

Since late June, the temporary weakening of the US dollar, coupled with improved overseas liquidity, has provided a common macroeconomic environment for the three major assets.

In late July, joint intervention in the exchange rate by the US and Japan, coupled with a narrowing of market expectations for a Federal Reserve rate hike, weakened the foundation of the dollar's strength. At the same time, rising concerns about the sustainability of US fiscal policy and increased scrutiny of the Federal Reserve's independence further reinforced gold's safe-haven and monetary attributes.

At a deeper level, the obstruction of the Strait of Hormuz and frequent disturbances in major mining areas have further exposed the fragility of the global energy and industrial metal supply chains; while the weakening of the US dollar's credibility provides longer-term pricing support for gold and resource commodities.

Therefore, gold is traded based on the credit of the US dollar and its safe-haven attributes, copper is traded based on supply constraints and strategic resource premiums, and crude oil is traded based on geopolitical risks and supply disruptions.

Gold: De-dollarization and US fiscal pressures converge, targeting $5,000.

Gold has rebounded after a significant correction in the first half of the year. It broke out of its low-level trading range on August 5th, and the weekly MACD confirmed a golden cross on August 21st. As of August 22nd, the volatility of gold ETFs was 27%, indicating that market crowding has not yet significantly increased.

It's worth noting that rising US Treasury yields have not suppressed gold prices. The report argues that US fiscal pressure and high interest payments are weakening the dollar's credibility, while strengthening gold's monetary attributes and the logic of de-dollarization.

The US fiscal deficit is projected to be $1.83 trillion in 2024 and $1.78 trillion in 2025, with interest payments accounting for 55% and 48% of total expenditures, respectively, both higher than the proportion of defense spending. As of June 2026, the cumulative fiscal deficit has reached $1.37 trillion.

Central bank gold purchases are also providing support. In July, China's central bank gold reserves increased by 640,000 ounces to 76.08 million ounces, the largest monthly increase since November 2024. Since the third quarter, holdings in the SPDR Gold ETF have also reversed from net reductions to increases, reaching 1,047 tons on August 21.

The report argues that US fiscal pressure, de-dollarization, central bank gold purchases, and capital repatriation will jointly support the medium- to long-term outlook for gold, with the price potentially reaching $5,000 per ounce in an optimistic scenario.

Copper: Tariff expectations create inventory mismatch, supply constraints continue to strengthen.

Copper prices have risen by about 15% since the beginning of the year, once approaching $14,500 per ton. Expectations of US tariffs are a major driver of this price increase.

The US has imposed a 50% tariff on semi-finished copper products, with a temporary exemption for refined copper, but plans to increase the tariff by 15% in 2027 and to 30% in 2028. The anticipated tariffs are driving copper resources to flow to the US ahead of schedule: US copper imports exceeded 200,000 tons in July, a new monthly high since 2014; COMEX inventories rose to a record high of 740,000 tons.

Conversely, inventories in non-US markets continued to decline. LME inventories fell to 238,400 tons, and SHFE inventories fell to 41,100 tons. On August 17, the LME cash copper premium widened significantly and an inverted market structure emerged, indicating a tightening of short-term supply.

The mining sector is also under pressure. Chile's copper production fell 7.7% year-on-year in the second quarter, and Codelco lowered its production target; copper concentrate processing fees (TC) even fell to -$181/dry tonne in August, and the ore shortage has forced smelters to compete for resources.

Supported by inventory mismatch, mining disruptions, and demand from AI and new energy sectors, the report believes that copper prices are unlikely to experience a deep correction before the implementation of US tariffs.

Crude oil: With both inventories and supply tightening, the central price level is unlikely to decline.

From June to August, Brent crude oil experienced a V-shaped trend: after the US and Iran reached a temporary understanding in June, it fell to $68 per barrel, and in July, as tensions rose again, oil prices rebounded to around $90 per barrel.

Supply contraction is becoming a significant support for oil prices. Since the conflict began, global observable oil inventories have decreased by approximately 410 million barrels, with a single-month decrease of 69 million barrels in July. As of the end of July, inventories were less than 7.9 billion barrels, falling to their lowest level since April 2025.

U.S. SPR inventories have also fallen to their lowest level since 1982. As of August 21, SPR was only about 290 million barrels, a significant decrease from the April high of 413 million barrels.

Navigation in the Strait of Hormuz was also severely affected. Before the conflict, approximately 120 ships passed through daily; after the conflict, this number dropped to below 10, with only about 1.25 oil tankers passing through daily in early August. OPEC's daily crude oil production in July was approximately 23.63 million barrels, a decrease of nearly 5 million barrels compared to before the conflict.

The IEA projects that the crude oil market deficit will reach 1.8 million barrels per day in the third quarter of 2026. Although demand is expected to decline by 1.56 million barrels per day for the whole year, low inventories and limited supply will still limit the downside for oil prices.

The report predicts that if the US-Iran situation remains deadlocked for an extended period, Brent crude oil prices may fluctuate between $80 and $90 per barrel. However, if the blockade of the two key straits exceeds expectations, oil prices could reach new highs. Even if the US and Iran resume effective negotiations, oil prices may decline due to a decrease in geopolitical premiums, but low inventories will limit the decline, with Brent crude potentially falling back to around $70 per barrel.

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