- Crude oil, gold, and base metals connect through inflation and currency effects from energy prices, industrial-cycle demand, and shifting risk sentiment, but correlations change with macro and geopolitics.
- In 2025 gold surged above US$4,000 while oil stayed weak, pushing the gold-oil ratio far above its long-run average and signaling heightened uncertainty.
- Gold’s strength has been driven by central-bank buying, safe-haven flows, and real-rate/dollar dynamics more than by oil-led inflation.
- Base metals like copper remain primarily growth- and electrification-driven with potential long-term supply deficits, making them a diversification play distinct from both oil shocks and gold hedging.
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The relationships between crude oil, gold, and base metals remain dynamically linked through inflation, currency movements, and demand for industrial production, but recent trends suggest significant divergence in their trajectories. The primary source outlines well-known mechanisms: oil drives inflation and production costs, boosting gold demand as a store of value; base metals respond to industrial demand and economic expansion. [Primary]
However, recent data through 2025 shows that gold has distanced itself from oil in key respects. Gold has jumped over 50% year-to-date, exceeding US$4,000 per ounce in October, amid weak oil prices which hovered in the US$50-70 range. The gold-oil ratio—how many barrels of oil one ounce of gold can buy—has risen well above historical norms, a signal that macroeconomic stress is favoring gold’s safe-haven role over oil’s industrial demand drivers.
Inflation and real interest rates are major defining factors: gold’s rally is less aligned with headline inflation inflows from energy costs, and more tied to negative real yields, central bank demand, political risks, and weakening US dollar dynamics. Meanwhile, oil suffers from demand concerns, oversupply from OPEC+ and strong production in shale and non-OPEC countries, reducing its ability to track gold’s rise.
Base metals—especially copper—are gaining attention for secular demand tied to electrification, AI, and renewable infrastructure. S&P Global projects copper demand to rise 50% by 2040, but warns of potential supply shortfalls absent significant investment. Despite this, base metals’ performance has not matched gold during recent monetary uncertainty periods, suggesting their cyclical sensitivity is intact.
Strategically, investors should consider shifting portions of exposure toward precious metals for hedging and defensives, maintaining exposure to industrial metals for growth and transition-oriented upside, and carefully balancing oil exposure given its volatility and lower recent return profile. Key open questions revolve around whether current gold levels are sustainable given rising real yields; whether base metals supply constraints will lead to accelerating inflation; and how policy decisions (monetary, fiscal, geopolitical) will interact to shape commodities’ risk-return dynamics.
Supporting Notes
- Gold’s price rose by more than 50% year-to-date in 2025, breaking above US$4,000 per ounce in October, while oil (WTI) dropped to the US$50-70 per barrel range due to demand softening and increased supply.
- The gold-oil ratio has surged above 40 in 2025, far exceeding the long-term mean of approximately 18, reflecting economic uncertainty and divergence between oil and gold behavior.
- S&P Global forecasts global copper demand will increase by 50% by 2040, reaching 42 million metric tons annually, driven by AI, defense, robotics, and electrification, while warning of a supply gap exceeding 10 million metric tons per year unless mining activity rises.
- Gold’s recent performance has been underpinned by central bank buying, ETF inflows, negative real interest rates, and weakened US dollar concerns.
- Oil is being impacted by oversupply from OPEC+, weak demand forecasts, and tariff-induced growth uncertainty.
- Base metals are more tightly linked to economic growth and industrial demand than to inflation or safe-haven flows; their correlation to gold tends to rise only under pronounced economic expansions. [Primary]