After gold and silver dominated the commodity rally in recent years, market attention may now be shifting toward copper. According to HDFC Tru’s latest report, Copper: The Next Leg of the Commodity Supercycle, leadership within commodities could be rotating from precious metals toward industrial metals, positioning copper as a potential candidate for the next phase of a broader supercycle.

The report suggests that while precious metals have already delivered substantial gains, copper may still be in the early stages of a larger move. Gold rose more than 60% and silver surged over 140% in 2025, while copper gained around 40% during the same period. Despite this rally, copper still trades at historically low levels relative to both gold and silver, a trend HDFC Tru believes may indicate further room for upside.

Multi-decade valuation

One of the strongest arguments supporting copper comes from relative valuation indicators. The Copper-to-Gold ratio has dropped to around 0.1%, a multi-decade low that historically has often preceded stronger future returns for copper. The report also highlighted that the Copper-to-Silver ratio has fallen to similar extremes, suggesting the metal may have lagged the broader commodity rally.

Historically, such valuation extremes have tended to mean revert, either through a correction in precious metals, stronger copper performance, or a combination of both. According to HDFC Tru, these ratios may indicate that copper is entering a catch-up phase within the commodity cycle.

AI, electrification and energy transition

Unlike previous commodity cycles that depended largely on economic expansion and industrial activity, copper demand is increasingly being driven by long-term structural themes.

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The report identified AI infrastructure, data centres, power grid investments, electric vehicles and global electrification projects among the major growth drivers likely to sustain demand over the coming decade.

These sectors are also viewed as less discretionary than traditional industrial demand. According to projections cited in the report, strategic categories such as AI, defence and energy transition could account for 45% of total copper demand by 2040, up from roughly 32% in 2024.

HDFC Tru also noted that copper is increasingly decoupling from traditional business-cycle commodities such as oil and steel. Rather than depending solely on cyclical economic growth, copper is now being supported by technology-driven and infrastructure-led spending patterns.

Supply constraints

While demand trends appear strong, supply growth remains constrained. The report pointed out that major new copper discoveries have become increasingly rare, while global mining investment weakened significantly after the previous commodity downturn.

Chile, the world’s largest copper producer, has also faced production challenges due to water shortages, operational disruptions and limited high-grade discoveries. HDFC Tru noted that Chile’s production levels are trending close to levels seen nearly two decades ago.

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Additional supply pressure could also come from rising input costs. Sulfuric acid, a critical component used in copper extraction, has surged roughly 80% year-to-date and over 200% year-on-year, potentially increasing mining costs and tightening supply economics.

The report further noted that commodities overall continue to trade near historically low levels relative to equities, while factors such as higher inflation expectations, de-dollarisation trends and fiscal spending may continue supporting hard assets. Even though risks including weaker Chinese demand, recession concerns and temporary supply surpluses remain, HDFC Tru believes copper may be entering a structurally different phase driven by both durable demand and limited supply.

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Published on: May 26, 2026 2:24 PM IST