Commodities Diverge: Copper Hits Record $12,000 on AI Demand; Gold Retreats on Ukraine Peace Hopes

London/New York – Commodity markets displayed a sharp divergence on Monday amidst thin year-end trading, driven by contrasting geopolitical signals and structural industrial demand. While industrial metals led by Copper surged to historic highs, precious metals headed by Gold faced significant profit-taking.

Copper's 'Perfect Storm'

Copper prices have skyrocketed to an all-time high above $12,000 per tonne, putting the red metal on track for its largest annual gain in over a decade. The rally is fueled by a confluence of supply shocks and insatiable demand from the burgeoning Artificial Intelligence (AI) sector.

Analysts point to a “perfect storm” driving the valuation:

• AI & Green Energy: Data center construction for AI and the ongoing transition to renewable energy have created a structural deficit. Demand is projected to outstrip mine supply well into the 2030s.
• Tariff Fears: Importers are rushing to stockpile metal ahead of anticipated U.S. tariffs under the incoming administration, creating a squeeze on immediate supply.
• Supply Disruptions: Major accidents at three of the worlds largest mines since October have severely constrained output, with LME inventories in Europe dwindling to under 20,000 tonnes.

“The market is reacting to a bonfire of bullish sentiment lit by the match of US inflow,” noted Albert Mackenzie, a copper analyst at Benchmark Mineral Intelligence.

Gold Slides on Geopolitical Thaw

Conversely, Gold (XAU/USD) retreated sharply from its recent all-time highs near $4,550, dropping approximately $80 to trade around the $4,445 level. The correction is attributed to easing safe-haven demand following reports of a potential peace deal in Ukraine.

Ukrainian President Zelenskys recent diplomatic overtures regarding long-term security guarantees and the emergence of negotiation frameworks have dampened the fear premium that typically supports bullion. Additionally, a modest recovery in the US Dollar and year-end profit-taking have accelerated the sell-off.

Silver (XAG/USD) also faced volatility, plunging over 5% to the $75 region. Market veterans warn that despite long-term bullish fundamentals, silver faces short-term headwinds including tax-loss harvesting and increased margin requirements from exchanges.