(The views expressed here are those of the author, a portfolio manager at Fidelity International)

Hong Kong - The copper-gold ratio recently touched a multi-decade low even as the world economy and stock markets continued to roll along.

However, this does not mean the indicator is broken. It is just telling a new narrative about global transition and fragmentation.

The commonly cited copper-gold ratio, or price of copper divided by that of gold, based on generic front-end COMEX futures contracts traded in New York, has historically been a go-to indicator of investor sentiment about global economic growth.

Copper is the quintessential industrial metal used across a range of industries, including construction, power, telecoms, machinery and appliances. Demand in those sectors tends to track the pace of global GDP growth, so when the world economy booms, demand for copper typically soars.

Gold, on the other hand, is the ultimate safe haven. Its price tends to rise during periods of economic and geopolitical stress or when real interest rates are low or negative.

Typically, in the past, when the ratio rose, it was an indication of a “risk on” environment. Investment expanded, appetite for safe assets fell, and the cyclical growth outlook improved. And whenever the ratio fell, it signaled the opposite. However, that relationship has started to unravel recently.

Global growth has proven more resilient than many expected, especially in the United States where the artificial intelligence boom has underpinned investment and stock markets have repeatedly hit all-time highs, even as the copper-gold ratio has declined sharply. To understand why, one needs to look closely at both the ratio’s numerator and denominator.

COPPER’S COMPLEX RIDE

The dramatic drop in the copper-gold ratio might suggest that copper demand is severely depressed, but this isn’t the case. While the dominant source of demand for copper over the past two decades – Chinese fixed asset investment – has slowed in recent years, there is now a new secular demand driver, electrification.

Electric vehicles, renewables, grid upgrades and broader electrification, including power-hungry data centers are responsible for a rising share of copper use. This has lifted the metal’s long-run demand outlook. Meanwhile, supply has been somewhat fragile.

Copper mining projects are notoriously vulnerable to delays, due to a complex combination of operational, environmental and social risks.

Outages can quickly tighten the market, as was seen in September at Indonesia’s Grasberg mine, one of the world’s largest copper reserves, which led to a force majeure declaration and cuts to global copper supply growth forecasts.

Strong demand and limited supply have pushed copper on the London Metal Exchange to record highs. However, the copper-gold ratio, which is based on U.S. prices, has been distorted by trade policy. Copper flooded into the U.S. ahead of expected tariffs from President Donald Trump’s administration.

When a 50% tariff on semi-finished copper finally did take effect in July, raw and refined copper were unexpectedly exempted, shocking investors.

New York copper futures plunged nearly 20% before rebounding partially, highlighting how disruptive trade policy can be. Ultimately, what happens with copper prices over the long term will likely reflect the electrification of the world’s two largest economies, the U.S. and China, suggesting that structural growth in copper demand still has significant runway ahead.

SAFE HAVEN?

That explains what’s happening with the numerator of the copper-gold ratio, but what about the denominator? Gold has been an enduring global store of value for centuries, but it has recently started behaving more like an equity.

Gold hit a record high above $4,300 per ounce last month. While prices have since fallen, gold is still up over 100% in the past five years, as of November 5.

One statistics currently making the rounds is the fact that gold’s five-year U.S. dollar return tops the S&P 500’s performance over that period. This comparison is getting attention precisely because it goes against intuition.

However, if you look more closely, you will see that most of gold’s outperformance occurred in 2025. For most of the prior years, gold largely languished while equities advanced on steady earnings growth.

Central bank purchases of gold did pick up after 2022, when Russia’s official foreign exchange reserves were frozen following the outbreak of the Ukraine war. But buying interest from financial investors truly accelerated this year, likely ignited by increased geopolitical risk and currency debasement fears. Gold then picked up significant momentum from retail investors as its price skyrocketed.

Momentum can cut both ways, however. In late October, gold experienced its sharpest one-day decline since 2013, a reminder that when a safe-haven becomes the object of speculative flows, its safety starts to come into question.

TRANSITION AND FRAGMENTATION

What this all ultimately means is that the copper-gold ratio is not “broken” but merely “bent” because the numerator and denominator are responding to different narratives. The copper price reflects transition: massive investment in an AI-powered, electrified, renewables-heavy economy that should require more copper over time.

The gold price reflects fragmentation: more siloed geopolitical blocs and a reassessment of unquestioned U.S. dominance across the global financial system.

These two narratives are occurring simultaneously, while a third factor – shifts in market behavior, including the rise of retail investment and momentum-based trading – is amplifying market movements. This evolution means the ratio is no longer a clean, high frequency “risk on/risk off” signal. Instead, this metric now tells a more complex story about how capital is being allocated between our economic future and our geopolitical present.

(The views expressed here are those of the author. Taosha Wang is a portfolio manager and creator of the “Thematically Thinking” newsletter at Fidelity International.)

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(Writing by Taosha Wang; Editing by Anna Szymanski)