The view from England: Gold’s copper foil

Like opposing characters in a literary plot, gold and copper highlight aspects of the other’s attributes and values.  

Writers frequently use opposing characters to build drama or create conflict, classically as foils and antagonists. The latter is a character who is in direct opposition, and whose actions hinder the protagonist. A foil is a character who accentuates the qualities of the protagonist (being named after an old jewellery trick of setting a gem on a foil base to enhance its shine).  

Good examples of foils in literature are Dr. John Watson to Sherlock Holmes in Sir Arthur Conan Doyle’s detective stories, and George Milton and Lennie Small in John Steinbeck’s Of Mice and Men. The latter characters are best friends but opposites physically and emotionally. William Shakespeare often used opposites to emphasize the differences in his characters. At the beginning of Romeo and Juliet, for example, Benvolio tries verbally to stop a fight between Abraham and Sampson, while Tybalt draws his sword.  

In the mining universe, we can agree that gold and copper are foils for each other, rather than antagonists. Their relationship is close, but they reflect different aspects of economic and political sentiment.  

According to the popular adage, copper has a doctorate in economics, with an ability to predict turning points in the global economy. This proverb stems from the metal’s widespread usage, from power generation and electricity distribution to iPhones, making Dr. Copper an early indicator of global optimism. In contrast, the price of gold has historically benefitted from the exact opposite, with the precious metal gaining from political and economic turmoil.  

Despite war in Europe, gold is struggling to break through US$2,000 per oz., while the price of copper touched an all-time high of US$10,730 per tonne (US$4.87 per lb.) on Mar. 7. The price of the red metal has been on a strong rising trend since falling to US$4,800 per tonne in March 2020, and is widely predicted to break through the psychologically important US$5 per lb. mark (US$11,023 per tonne) by August.  

As a result, gold recently traded at barely 6,000 times the price of copper. This is approaching the recent low of 5,800 recorded in May 2018, and contrasts with the multiple of nearly 11,000 two years ago.  

The current price multiple represents the typical relationship between the two metals for much of the 1990s. Based on monthly averages, gold traded at a price of circa 4,000-7,000 times that of copper from late 1987 to mid-2005, before gold collapsed to multiples of below 3,000 in 2006-07. Relative to copper, gold then enjoyed a 13-year bull run to mid-2020.  

In part, this price disparity reflects the relative scarcity of the two metals, with the base metal being 15,000 times more abundant in the Earth’s crust than the precious metal (60 parts per million compared with gold’s 0.004 ppm). For reference, a 10,000 price multiple would make 1 gram per tonne of gold the equivalent value in mined ore of 1% copper.  

Both metals will be watching the war in Ukraine with interest. In its recently released Commodity Briefing Service on copper, S&P Global Market Intelligence observed that Russia’s invasion is “adding strain to a copper market already stressed by low visible stocks and Latin America supply concerns.” SPGMI noted that Russia is the world’s fifth-largest producer of refined copper, with about 30% of its exports going to China and most of the remainder historically going to Europe. Russia is also the eighth largest mined-copper producer, with output this year forecast to rise 11%, year over year, to 893,000 tonnes.  

Gold is also watching Ukraine, and sanctions, carefully, as Russia is the world’s third-largest producer of the precious metal, accounting for 9.3% of the global output of 102.9 million ounces last year. According to SPGMI, the country had an output of 9.6 million oz. in 2021, with the other leading national gold producers last year being China with 10.6 million oz., Australia at 10.3 million oz., Canada with 6.6 million oz. and the United States with 6.1 million oz.  

Despite their very different characters, and like John Steinbeck’s George and Lennie, gold and copper are surely the best of friends. After all, they are often to be found together (being grouped in the middle of the periodic table’s Group 11), and are only separated by their colleague, silver.