UBS believes that the core drivers of copper, gold, and oil prices are shifting from single speculative factors to the combined influence of macro conditions, supply constraints, and allocation demand.

Overview

Centered on UBS’s SMM 2026 base metals roundtable discussion, the report covers oil-price scenarios amid geopolitical conflict, copper-supply constraints, decomposition and scenario forecasting of copper-price drivers, gold allocation demand and macro drivers, as well as potential support from China’s 15th Five-Year Plan for AI, new energy, new materials, energy storage, power grids, mining, and metallurgy. The report leans toward macro and industry-themed research rather than deep company-level analysis.

Core views

Key perspectives include: First, the current oil-price trajectory shares similarities with the Gulf War, but with larger supply disruptions; safety premiums and restocking could keep prices structurally higher than in a non-shock scenario. Second, copper supply remains under pressure; copper prices have been boosted by speculative positioning, but macro and fundamental factors are beginning to provide underlying support. Third, gold benefits from reserve diversification, official-sector buying, overseas-investor demand, and global macro and geopolitical uncertainty, retaining its allocation value. Fourth, China’s 15th Five-Year Plan is expected to continue prioritizing AI, new energy, new materials, decarbonization, energy storage, power grids, and upgrades to traditional industries, favoring themes tied to the upstream industrial base.

Analysis framework

The report cross-validates commodity-price drivers through historical-event comparisons, shipping and oil/gas transportation data, mine-production and disruption statistics, multivariate rolling-regression models for copper and gold, scenario analysis, macro forecast tables, and policy-planning indicators. The copper-price model incorporates macro, fundamentals, inventory, and positioning, while the gold model includes TIPS, U.S. public debt, U.S. M2, Eurozone M2, China M2, and CFTC non-reporting positions, among other variables.

Methodology notes

• Commodity Price Driver ModelMultivariate Rolling Regression

  Incorporating macro, supply-demand, inventory, and positioning factors into a dynamic model to explain how the weights of copper and gold price drivers shift over time.

  This method identifies the extent to which prices at different times are jointly driven by macro liquidity, the U.S. dollar, supply constraints, demand-proxy variables, inventory, and speculative positioning, making it suitable for analyzing shifts in driver composition; however, charts primarily show relative contributions rather than precise causal predictions.

• Scenario AnalysisCopper Price Bull-Bear Baseline Scenarios

  Providing baseline, bear-market, and bull-market ranges for LME copper prices over the next quarter.

  The baseline scenario is US$12,004–12,281/t, the bear-market range is US$11,385–11,653/t, and the bull-market range is US$13,009–13,337/t, reflecting price distributions under changing fundamentals and positioning.

• Macro Policy AnalysisFifteenth Five-Year Plan Target Comparison

  Comparing progress under the 14th Five-Year Plan with UBS’s projected targets for the 15th, observing the impact of industrial policy on basic materials and energy transition.

  Key indicators include the share of non-fossil energy, the proportion of GDP accounted for by core digital industries, urbanization, R&D spending, air quality, and consumption patterns, used to assess policy directions for new energy, new materials, energy storage, power grids, and upstream-industry upgrades.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Copper

  Directly influenced by supply disruptions, macro factors, inventory, demand-proxy variables, and speculative positioning.

  Strengths

  Mine supply is constrained, demand from green energy and AI is growing, and fundamentals provide support when positioning is not extreme.

  Weaknesses

  Prices are already elevated; if speculative positioning retreats or demand proxies weaken, short-term volatility could intensify.

  Comparison

  Compared with pure positioning-driven movements, the report argues that the combination of macro plus fundamentals and positioning better explains actual prices.

  Risks

  Deteriorating real-estate construction, lower-than-expected new-energy installations, declining appliance-export orders, and underwhelming power-grid capital spending.

• Aluminum

  Linked to China’s industrial upgrading, new energy, power grids, and enhanced competitiveness of traditional industries.

  Strengths

  The 15th Five-Year Plan supports new materials, new energy, energy storage, smart grids, and upgrades to the upstream industrial base.

  Weaknesses

  Downstream demand remains subject to cycles in real estate, exports, and power-investment projects.

  Comparison

  Like copper, aluminum is shaped by policy and industrial demand, but the report provides fewer quantitative price-scenario details.

  Risks

  Weaker real-estate construction, slower-than-expected wind/solar installations, declining appliance-export orders, and underperforming power-grid investments.

• Gold

  Affected by reserve diversification, real interest rates, money supply, public debt, central-bank and investor buying, and safe-haven demand.

  Strengths

  Declining U.S. reserve holdings, allocation demand from official sectors and overseas investors, and persistent global uncertainty.

  Weaknesses

  If Fed policy tightens further or real interest rates rise, gold prices may underperform expectations.

  Comparison

  Gold’s logic leans more toward macro allocation and safe haven, distinct from the industrial-demand profile of copper and aluminum.

  Risks

  The Fed implementing tighter monetary policy than anticipated, and delays in gold-mining companies’ expansion plans.

• Oil Prices

  Influenced by geopolitical conflict, Hormuz transport disruptions, inventory releases, and alternative transportation capacity.

  Strengths

  Safety premiums, restocking, and large-scale supply outages can push the structural price floor higher.

  Weaknesses

  Historical experience suggests that prices often revert within months after shocks, and inventory releases along with alternative routes can partially cushion the impact.

  Comparison

  The scale of supply losses in the current conflict exceeds that of the 1990 Gulf War, resulting in a larger short-term price surge.

  Risks

  Conflict de-escalation leading to fading safety premiums, or policy-driven inventory releases dampening prices more than expected.

Key data

• Oil Price Increase Under Current ConflictApproximately 100%The report states that roughly 9–10 mb/d of supply is offline due to the current conflict, accounting for about 10% of global supply, and oil prices have risen by approximately 100% over the past 2–3 months.
• Oil Price Comparison During the 1990 Gulf WarApproximately 80%During the 1990 Gulf War, about 4–5 mb/d of supply was lost, representing roughly 6–7% of global supply, and oil prices rose by approximately 80% over 2–3 months.
• Hormuz Remaining Shortage ScenarioApproximately -9 mb/dCharts indicate that even after accounting for pipelines, inventory releases, and limited passage, Hormuz-related oil flows may still face a shortfall of roughly 9 mb/d.
• LME Copper Baseline ScenarioUS$12,004–12,281/tThis represents the 90% confidence interval baseline scenario for the coming quarter, as shown in the model’s scenario chart.
• LME Copper Bear-Market ScenarioUS$11,385–11,653/tThis is the price range under adverse assumptions.
• LME Copper Bull-Market ScenarioUS$13,009–13,337/tThis is the price range under favorable assumptions.
• Dollar Reserve Share Decline and Gold Price SensitivityEach 5% decline corresponds to an increase of approximately US$856/ozA report chart title notes that for every 5% decrease in the dollar’s share of reserves, implied gold prices rise by about US$856/oz.
• UBS’s View on the Fed Rate PathOne 25 bp rate cut in 2026, followed by two cuts in 2027A chapter heading reveals UBS’s internal assessment of the U.S. federal funds rate trajectory.
• U.S. Real GDP Growth Forecast2.0% in 2026, 2.1% in 2027, 2.6% in 2028From UBS’s macro forecast summary table, expressed as Q4/Q4 percentages, excluding unemployment rates.
• U.S. PCE Inflation Forecast3.3% in 2026, 2.1% in 2027, 2.0% in 2028Also from UBS’s macro forecast summary table.
• UBS’s Estimate of the Fifteenth Five-Year Plan’s Non-Fossil Energy Target25.0%The table shows UBS’s projection for the 15th Five-Year Plan’s target, either for 2030 or the 2026–30 period.

Impact & implications

For investment implications, copper’s upside is supported by mine-side disruptions, green-energy and AI-related demand, inventory dynamics, and positioning; however, if real-estate construction, new-energy installations, appliance-export orders, or power-grid capital expenditures fall short of expectations, the copper-aluminum sector may come under pressure. Gold’s allocation logic operates more at the macro portfolio level, bolstered by declining U.S. reserve holdings, official-sector buying, and safe-haven demand; yet if Fed policy tightens more than anticipated, gold prices and gold-mining profitability could soften. At the policy level, continued emphasis on AI, new energy, new materials, energy storage, and power grids in the 15th Five-Year Plan would reinforce mid-term demand for upstream industrial materials and metallurgical upgrades.

Risks

• Downside risks for copper/aluminum include deteriorating real-estate construction, solar/wind installations falling short of expectations, declining appliance-export orders, and underwhelming capital expenditures by State Grid and Southern Grid.
• Upside risks for copper/aluminum encompass improved real-estate development, better-than-expected wind/solar installations, overachieving power-grid spending, and stronger-than-expected appliance shipments.
• Downside risks for gold mining involve Fed monetary policy tightening more than expected, causing gold prices to underperform, along with delays in expansion plans.
• Upside risks for gold mining comprise better-than-expected gold prices and higher-than-expected output.
• Oil-price scenarios depend heavily on the intensity of geopolitical conflict and Hormuz transport blockages; should tensions ease or alternative supplies emerge, safety premiums could subside.
• Model results hinge on macro, supply-demand, inventory, and positioning variables; most charts present visual estimates and scenario modeling rather than definitive forecasts.

What to watch

• Changes in net long positions in LME and COMEX copper, and whether copper prices continue to exceed the model path without positioning factors.
• Quarterly production figures from major copper miners, along with mine-side disruptions, ore grades, weather, strikes, technical issues, and slow ramp-up factors.
• Real-estate construction in China, solar/wind installations, appliance-export orders, and capital expenditures by State Grid and Southern Grid.
• The dollar’s share of globally allocated reserves, official-sector gold purchases, and shifts in DM and EM gold holdings.
• The pace of Fed rate cuts in the U.S., and the influence of TIPS, U.S. public debt, U.S. M2, Eurozone M2, and China M2 on gold prices.
• The volume of Hormuz oil-tanker traffic, pipeline detour capacity, and IEA and major-country strategic inventory releases.
• The formal targets in the 15th Five-Year Plan for AI, new energy, new materials, non-fossil energy share, energy storage, power grids, and upgrades to mining and metallurgy.