Diverging Metals: Gold, Silver, and Copper React Differently to Interest Rate Hikes
The recent performance of gold, silver, and copper has been marked by significant divergence in some periods and convergence in others. Over the past year, silver has outperformed gold with a gain of over 38%, compared to gold's 13% rise. However, this year, silver has fallen by 15% while gold is flat.
The key driver behind these diverging numbers appears to be interest rate expectations for gold and silver, which are influenced by the US Fed's rate actions. When interest rates rise or are expected to rise further, investors shift their money to other higher-yielding assets, reducing demand for gold and silver.
Copper, on the other hand, is driven by supply constraints rather than interest rate expectations. According to the International Copper Study Group, world copper mine production declined by 1% in the first seven months of 2026 due to disruptions in major producer countries such as Chile, Indonesia, and the Democratic Republic of Congo.
This structural shortage has led to a steady rise in copper prices, with a 22% increase over six months and a 45% gain over the past year. Copper's demand is driven by industrial usage in sectors such as power grids, AI data centers, electric vehicles, and defense production.