Copper doesn't get the spotlight that gold does. But ignore it at your own peril. The red metal has a quiet, powerful relationship with both silver and gold that most investors miss entirely.
Start with silver. The correlation between silver and copper price levels from January 1990 through June 2023 clocked in at 0.90 on monthly averages. That's not coincidence. It's structure. A big chunk of silver supply comes as a byproduct of copper mining, not from primary silver mines.
When copper projects expand or get disrupted, silver supply moves with them. Capital flows into large copper operations indirectly shape future silver production capacity.
The silver-to-copper ratio stays remarkably stable around 6 over the long haul. Supply linkage explains part of the story. Demand tells the rest. About 54% of silver demand comes from industrial uses. Copper's demand profile looks nearly identical.
Both metals get pulled into electric vehicles, renewable energy, manufacturing, infrastructure. When the economy heats up, both catch a bid. When recession looms, both get hammered.
Copper earned the nickname “Dr. Copper” because it diagnoses global economic health. Silver often moves in lockstep. Five-year correlation between the two sits at 0.725, jumping to 0.878 over the most recent year.
Gold behaves differently. It's a safe-haven asset first, industrial metal never. Financial stress can push gold higher even as copper and silver crater on weak industrial demand.
Here's where it gets interesting. The five-year gold-silver correlation stands at 0.771, rising to 0.917 recently. Silver straddles both worlds, industrial and precious.
A hybrid index averaging gold and adjusted copper prices shows a one-year correlation to silver of 0.956. Higher than silver's correlation with either metal alone. Professional traders increasingly rely on automated trading connections to capitalize on these price relationships across multiple metal markets simultaneously. Understanding market liquidity in these metals becomes crucial when trading these interconnected assets, as copper's high trading volume often provides better execution than less liquid precious metals markets. Unlike currency pairs in forex markets that trade continuously, metal markets follow specific trading hours that can impact execution timing.
