Copper Prices Surge Amid Tariff Uncertainty: Implications for Risk Assets

March 20, 2025, 12:59 p.m. UTC

Copper, a long-standing economic indicator, is experiencing a significant price surge, approaching record highs. Traders and investors often look to copper as a barometer for economic health, and its rising prices typically correlate with other risk assets, including cryptocurrencies like Bitcoin (BTC). However, the recent rally in copper has raised concerns that its traditional role as a reliable economic indicator may be compromised.

Copper Prices on the Rise

As of recent reports, copper prices have surged approximately 12% year-to-date, reaching around $5.10 per pound on the COMEX. Analysts at ING attribute this spike primarily to the impact of President Donald Trump’s strict trade tariffs, which have introduced a wave of uncertainty into both the U.S. and global economies. Such tariffs have prompted the Federal Reserve to adjust its economic forecasts, anticipating slower growth amid rising inflation.

"Copper is up around 12% so far this year, driven mostly by uncertainty over Trump’s trade policies. Tariff news is likely to continue to dictate price direction in the months ahead," the analysts noted in a client communication on March 18. ## Reevaluating Correlations with Risk Assets

Historically, seasoned cryptocurrency traders have observed strong correlations between copper and Bitcoin, often leading to bullish speculation when copper prices increase. In particular, BTC has seen robust gains in years characterized by rising copper-gold ratios, a trend that appears to be commencing once again.

However, industry experts caution against reading too much into the current copper rally. Unlike previous instances driven by solid economic fundamentals, today’s market dynamics suggest that the copper price surge is not necessarily a bullish indicator for risk assets. This paradigm shift raises questions about the reliability of copper as a precursor for positive movement in BTC and other cryptocurrencies.

Trade Tariffs Impacting Currency Correlation

Adding another layer to the price volatility is the relationship between the Australian dollar (AUD) and copper prices. Australia is known for being the seventh-largest producer and the third-largest exporter of copper globally. Typically, there’s a high correlation between the AUD and copper prices, with a coefficient exceeding 0.80. However, this correlation is failing to hold strong in the current market context, likely due to the intricacies introduced by the tariffs and their effects on global trade.

Stimulus Measures from China

Another factor in the copper rally is the recent stimulus plan rolled out by the Chinese government. As the largest importer of commodities, China’s economic strategies significantly influence global copper prices. This week, Beijing unveiled its most comprehensive approach in decades aimed at boosting domestic consumption. The plan is designed to address obstacles posed by external market shocks, notably Trump’s tariffs.

"This policy package includes efforts to increase household income, spur spending, and support population growth," ING analysts explained, referencing data that highlighted better-than-expected Chinese consumption, investment, and industrial production for the first two months of the year.

Conclusion

As copper prices continue to ascend amid geopolitical tensions and economic policy changes, stakeholders in both traditional and cryptocurrency markets are urged to take a more cautious approach in interpreting these signals. While the uptick in copper prices may seem optimistic at first glance, the underlying causes present a complex picture that could impact broader risk asset markets, including Bitcoin. Investors will need to stay vigilant as they navigate these changing economic waters.