Electrification, Deficits, and Geopolitics Defining the Commodity Move
Commodity markets have seen significant moves this year, but beneath the volatility we believe a broader structural trend is emerging. Over the past month, gold has risen 9.64%, silver 12.45%, copper 5.01%, while copper remains the strongest performer year to date, up 13.98%. Gold and silver have experienced much greater volatility, with silver still down 9.5% year to date despite its recent rebound.1 These moves are occurring against a backdrop of rapidly accelerating electricity demand, with global power consumption growing 3% in 2025 and electricity demand expanding roughly 2.3 times faster than total energy demand. EV electricity demand grew 38% and data center demand 17%, while solar PV accounted for more than a quarter of global energy demand growth.2
The continued momentum in AI is strengthening the electrification story. During the recent SpaceX earnings call, Elon Musk highlighted memory as an increasingly important constraint on AI infrastructure, noting that memory output is growing around 20% annually while demand could increase by 200% or more.3 While his comments were focused on memory, the broader implication is that AI’s rapid expansion is increasing demand for the physical infrastructure required to support it. Supporting this, data centers and AI account for nearly half of the US’s electricity demand growth, with grid-connected data center power demand expected to be over 75 GW by 2026 and potentially exceed 130 GW by 2030.4 Copper, silver and aluminum are at the forefront of this continued development, as they serve as critical inputs across grid expansion, data centers, EVs, renewable energy, and energy storage, just as supply constraints are becoming more apparent providing a favorable environment for these key commodities.
Copper at the Center of Electrification
Copper stands at the center of the electrification narrative, and we believe the long-term setup remains particularly compelling. Copper is essential across EVs, renewable energy, grid expansion, transformers, charging infrastructure and AI data centers, creating multiple sources of demand that are converging at the same time. EVs require approximately 2.9 times more copper per vehicle than conventional cars, with EV-related copper demand projected to increase from 1.7 million tons to 4.3 million tons by 2035.5 At the same time, S&P Global forecasts total copper demand to rise roughly 50%, from 28 million tons in 2025 to 42 million tons by 2040, driven by electrification, grid expansion, renewables, EVs, AI and data centers.6
The challenge is that supply is struggling to keep pace. Chile, the world’s largest copper producer, has cut its 2026 production forecast for the second consecutive quarter to 5.27 million metric tons, down 2.6% year over year. Goldman Sachs also cut its 2026 global mine supply outlook by 350,000 tons following disruptions to mines in Indonesia the DRC, with neither expected to return to full capacity until 2028.7 Along with current mine disruptions, new mining capacity is limited as it can take up to 18 years to develop a new copper mine, meaning today’s investment decisions will not immediately solve the emerging supply gap. The market is already expected to run a deficit of roughly 500,000 metric tons this year, with projections calling for that deficit to expand dramatically to approximately 7.8 million metric tons by 2030.8 The ability for supply to recover is additionally impacted by declining ore grades, fewer major discoveries, and aging mines. The industry is estimated to require up to $250 billion in investments to meet incremental electrification demand, meaning prices need to remain elevated enough to incentivize new development. Copper has already reflected some of this tightening, with prices reaching a historical high of $6.50 per pound in the second quarter and futures recently trading at $14,218.50 per ton.9 We view the combination of accelerating electrification demand and constrained supply as one of the strongest structural commodity themes over the coming decade.
Silver Increasingly Recognized as an Industrial Metal
Silver offers a similarly compelling supply and demand setup, but with an additional advantage because it sits at the intersection of precious metals and industrial demand. Solar is particularly important as the global solar industry consumes approximately 20% of annual silver supply, with silver paste accounting for 29% of the total cost of a solar panel, with most activity concentrated in China. China’s silver imports reached approximately 836 tons in March, up 78% from February and 173% above the 10-year seasonal average, reflecting strong retail and solar demand.10 While manufacturers are beginning to pursue copper-based substitutes, the transition is expected to take years to fully materialize.
Additionally, supply is struggling to match the rapidly increasing demand. The Silver Institute projects the market will enter its sixth consecutive year of structural deficit, with the 2026 deficit widening 15% to 46.3 million ounces.11 Industrial demand from photovoltaics, electrification and electronics is expected to continue rising while supply growth remains limited, keeping the market in deficit into 2027. This creates an interesting dynamic where higher silver prices can encourage thrifting, substitution and additional scrap supply, but the underlying electrification trend continues to expand the addressable demand base. Silver has also shown significant volatility, surging nearly 50% during the first three weeks of January before retreating sharply and subsequently recovering to approximately $65.12 Despite that volatility, the combination of a sixth consecutive annual deficit, tight inventories and growing industrial demand provides a constructive long-term backdrop.
Aluminum Joins the Electrification Trade
Aluminum provides another important piece of the electrification story. While its supply outlook is more balanced than copper, the long-term demand trajectory remains firmly tied to EV adoption, renewable energy and electrical transmission. Global aluminum demand is expected to grow by almost +40% by 2030, largely driven by EV-related aluminum demand which is projected to reach 10 million tons by 2030, a ten-fold increase from 10 years ago.13 Aluminum is also becoming increasingly relevant to energy storage, with battery storage for the grid and data centers creating additional demand for aluminum battery enclosures and busbars.
Near-term supply conditions have added another layer to the story. Approximately 9% of global aluminum output has been put at risk by disruptions in the Middle East, while CRU projects a global aluminum supply deficit of 1.4 million tons in 2026.14 European premiums could potentially reach $700 per ton, and supply disruptions are not expected to immediately disappear even if geopolitical tensions ease because energy constraints can prevent smelters from quickly restarting. We believe aluminum is therefore best viewed as a longer-term electrification beneficiary with a more balanced supply response than copper. The market could move into a slight surplus around 2028 as additional supply comes online, but the structural demand drivers remain intact, with vehicle light-weighting, renewables and electrical transmission expected to push the market back toward deficit from 2029 onward.
Gold Provides the Precious Metals Anchor
Gold has experienced one of the most volatile years across the commodity complex. In the first half of 2026, gold entered its first bear market since 2022, falling from record highs in January above $5,000 to around $4,000 per ounce as rising real yields and a more hawkish Federal Reserve outlook, driven in part by Iran-related inflation concerns, weighed on precious metals.15 However, the macro backdrop has begun to shift more favorably for gold. The slower-than-expected August jobs report and tame July CPI reduced expectations for a September rate hike from 52.5% in July to 38.9%, helping gold rally more than 7% in its strongest week since January.16 This shift is particularly important given that rate hike expectations have been one of the primary headwinds for gold throughout 2026. As the market increasingly prices a more dovish Fed, declining expectations for further hikes and the potential for lower rates should reduce the opportunity cost of holding gold and provide a meaningful tailwind to prices.
Gold is also benefiting from continued central bank accumulation, with China and Poland providing particularly strong examples of this trend. China’s central bank extended its gold-buying streak to 21 consecutive months in July, adding roughly 20 tons during the month, its largest increase since October 2023. This follows another roughly 15 tons purchased in June despite gold falling 12% that month. Poland has been similarly aggressive, with the National Bank of Poland purchasing approximately 82 tons year to date as of early July, including roughly 37 tons since April, worth around $5 billion at then-current prices.17 This institutional demand is particularly important because it reflects a longer-term effort to diversify reserves and reduce reliance on the dollar rather than simply responding to short-term price movements. The World Gold Council’s 2026 survey reinforces the trend, with 89% of central banks expecting global gold reserves to increase over the next 12 months and a record 45% expecting their own holdings to rise.18 Alongside the potential for a more dovish Fed and lower rates, continued central bank accumulation provides an increasingly strong structural foundation for gold.
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[1] Bloomberg, as of August 12, 2026
[2] Maybank Analyst Note, as of July 28, 2026
[3] SPCX 2Q26 Earnings Call, as of August 4, 2026
[4] UBS Analyst Note, as of July 25, 2026
[5] Maybank Analyst Note, as of May 2, 2026
[6] Bloomberg Intelligence, As of January 8, 2026
[7] Bloomberg Intelligence, As of August 11, 2026
[8] Deutsche Bank Analyst Note, As of October 16, 2025
[9] Bloomberg, as of August 12, 2026
[10]Deutsche Bank Analyst Note, As of February 2, 2026
[11]Bloomberg Intelligence, As of April 15, 2026
[12] Bloomberg, As of August 12, 2026
[13] UBS Analyst Note, As of February 14, 2026
[14] UBS Analyst Note, As of February 14, 2026
[15] Bloomberg, As of August 12, 2026
[16] Bloomberg, As of August 12, 2026
[17]Bloomberg Intelligence, As of July 28, 2026
[18]Bloomberg Intelligence, As of July 30, 2026
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