Column: Top five contrarian commodity scenarios for 2025
Overall, the first part of 2025 is likely to be defined by a period of uncertainty.
The Gundlach ratio, named for famed money manager Jeffrey Gundlach who closely watches the relationship between copper and gold, is trading near the lowest levels since the start of 2021, signalling that a recession might be looming.
Changes in the measure are a barometer of investor sentiment and the comparison has historically been a proxy for nominal interest rates and future economic growth, with a falling ratio consistent with rates flat to down.
Institutional asset managers also use the copper–gold ratio as one of the 10-year Treasury yield’s leading indicators.
Copper prices touched a near six-month low on Tuesday as speculators boosted bearish positions amid worries about recession and weak demand in China.
Copper for delivery in July was down 0.7% on the Comex market in New York, touching $3.65 per pound ($8,030 per tonne).
Click here for an interactive chart of copper prices
“The short-term outlook has deteriorated with recession risks in Europe and the U.S., and a Chinese recovery that has not been commodity intensive,” said Ole Hansen, head of commodity strategy at Saxo Bank, Copenhagen.
Gold is up over 9% this year on demand for safe haven assets.
In March, Gundlach said a recession could happen within the next four months, mentioning how the recent US bank failures have exacerbated the tightening of financial conditions caused by higher borrowing rates.
“There’s is obviously financial fragility in Europe and the United States is also trying to cause a recession,” Gundlach told CNBC in a recent interview.
(With files from Reuters and Bloomberg)
