The mismatch between bond markets and copper explains extreme price swings

The scale disparity

The size mismatch between traditional financial assets and physical commodities dictates market behavior during periods of capital reallocation. Goldman Sachs calculates that open interest in the global copper market is approximately 135 times smaller than the amount of outstanding privately owned US Treasuries. This structural disparity means that investor diversification flows can drive large short-run price boosts because commodity markets are small versus equities and bonds.

Portfolio sensitivity

The dynamic is visible across other hard assets, including precious metals. Goldman Sachs notes that with gold ETF allocations in US private sector financial portfolios at only about 0.2%, there is room for additional diversification into gold. The sensitivity to new capital is precise: Goldman Sachs estimates that every one basis point increase in the gold share of US financial portfolios raises prices by 1.5%.

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Source institutions：Goldman Sachs

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