Copper prices rocket 11% higher in mad scramble following tariff threat: Is silver next to explode?
NEW YORK (July 9) Copper prices exploded to record highs on Tuesday after former President Donald Trump shocked markets with a surprise 50% tariff on all imported copper, triggering a rush of U.S. buying and global supply fears.
Within minutes, Comex copper futures surged to an intraday record high of $5.896 per pound, up 11% on the day. Although prices have since retreated from those highs, they remain in record territory, trading at $5.48 per pound.
In an interview with Kitco News, Bart Melek, Head of Commodity Strategy at TD Securities, described the price action as a liquidity event—similar to what drove gold prices higher at the start of the year.
He explained that Trump’s proposed tariff is creating a significant premium for U.S. copper. Copper traded on the London Metals Exchange is currently priced at $9,870 per tonne. After adjusting for the exchange rate, Melek said that U.S. copper carries about a $2,000 premium over London prices.
“That is a pretty attractive spread,” he said. “So we are going to see as much inventory as possible flow into U.S. warehouses, and that is going to put pressure on global supplies.”
Michele Schneider, Chief Market Strategist at MarketGauge, said she also sees strong potential for copper prices, as U.S. tariffs will impact an “already iffy supply.”
At the same time, Schneider noted that copper demand is increasing, driven by the AI revolution and the need for new data centers, which are prompting renewed investments in upgrading the nation’s energy infrastructure.
While copper is posting massive gains, some analysts say investors should also keep an eye on another metal.
Phillip Streible noted that silver could see a significant boost as a result of rising copper prices.
The silver market has already pulled away from Tuesday’s low of $36.30 per ounce. Spot silver last traded at $36.55 per ounce, down 0.35% on the day.
“First copper goes, and then silver explodes,” Streible said.
Silver is currently outperforming gold, as the yellow metal struggles to hold support at $3,300 per ounce, down 1% on the day.
Melek expressed skepticism that silver prices will benefit from higher copper prices, calling this a market-specific liquidity event. Still, he added that silver could attract renewed interest as a value play.
Schneider said she remains extremely bullish on silver, emphasizing that the same demand driving copper is also a key factor for the precious metal.
“Silver is an industrial metal and also in shorter supply,” she said.
While investors are enjoying copper’s blue-sky breakout, Melek cautioned that risks remain. He said it will be difficult for the U.S. to maintain these tariffs, as they could hurt U.S. manufacturing competitiveness.
“This will increase input costs and make American products more expensive,” he said.
Currently, US domestic production only accounts for about 64% of domestic needs. To meet domestic consumption, the country needs to import up to 700,000 metric tons of copper.
Despite the risk, Melek added that a significant correction in copper is unlikely, as U.S. demand only represents 8% of global supply. He also noted that if the LME wants to build up its copper inventory, it will need to close the premium gap with the U.S., meaning higher prices could continue to fuel even higher prices.
“The U.S.-London premium has averaged $924 per tonne since Donald Trump’s Liberation Day, which is about $850 per tonne higher than the average of the past two years,” Melek said in a note. “Front-month copper contracts on Comex have gained around 25% so far this year, while LME prices have risen by a more modest 13%.”
KitcoNews
