Metals lose steam while commodities gain strength

Metals like copper and nickel have not benefited from the surge in commodities

Does this stem from stagflation?

Between January 2024 and the beginning of 2026, commodity prices stagnated; today, they are skyrocketing. Since January 1st, the SandP GSCI index of 24 major raw materials has increased by 29%. This indicates that energy, which makes up over half of the index's composition, is heavily weighted. The second-largest component of the index, agriculture prices, will also be impacted by higher oil and gas prices. US wheat futures have increased by 15%.

According to The Economist, the Middle East is more than just a source of hydrocarbons; it provides 22% of the world's traded urea (a fertilizer), 1/3 of its helium, and 45% of its sulfur (used as a plant nutrient). Additionally, the Gulf is a significant source of petrochemicals needed for everything from glycol (a paint ingredient) to basic pharmaceuticals. A shortage of fertilizer for a few more weeks could have "catastrophic" effects on global harvests later this year, as spring planting is "imminent" in the northern hemisphere.

Industrial metals lose out when commodities rise.

Since the beginning of the year, the S&P GSCI Industrial Metals index has remained flat, indicating that the increase in commodities has not extended to metals. Prices for aluminum have increased by 8% since January 1st; 9% of the world's supply comes from the Middle East. However, nickel has stagnated, and copper, which has dropped 4% this year, has been acting like gold, experiencing a decline following a multi-year surge. The industrial demand that supports metals markets is not encouraged by the possibility of global stagflation.

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Start your trial According to Andy Home on Reuters, Copper started the year with "a dose of the metals fever" amid dire warnings that shortages would result from the skyrocketing demand for electricity. However, current supplies of copper are plentiful, despite traders' bets on shortages later this decade. Chicago Mercantile Exchange warehouse stocks in the US have increased dramatically from 85,000 tons at the beginning of 2025 to 536,000 tons today (US stockpiling has been accelerated by attempts to evade import tariffs). The "current reality" of well-stocked warehouses "yawns ever wider" in comparison to "speculators' great expectations."

According to Alan Livsey in the Financial Times, the structural metals tale may still come to pass. Major international miners reduced their investment in new mines by "at least a third" between 2015 and 2022 in order to concentrate on paying dividends. Mines have extremely long lead times, even though investment began to increase once more in 2023. The repercussions of past underinvestment will soon become very apparent. There are other attractions for real assets. They offer protection against periods of inflation as well as a protracted decline in the dollar, which currently seems a little overpriced. Additionally, investors are keen to diversify into other themes during a period of AI-driven concentration risk. "Commodities tend to go through cycles," BlackRock's Evy Hambro says. "It seems that the next cycle is just getting started. The "

Why is gold no longer shiny?

Gold's value.

Investors who were hoping that gold would help them recover from the energy shock have been let down. Since hostilities started on February 28, gold has dropped 16% in dollars (and 15% in sterling). It makes sense that gold would perform well during a period of conflict and inflation.

So why the decline? First of all, gold had already experienced an unprecedented surge that culminated in an all-time high in late January. The yellow metal appeared overextended going into the war, having surged 174 percent in the preceding two years. Second, real interest ratesthat is, interest rates adjusted for inflationhave a significant impact on gold. Interest rates and inflation appear to be on the rise, which makes gold less appealing than rivals like government bonds.