Metals futures

Definition

Metals futures split into two economically different families sharing exchange plumbing: PRECIOUS metals (gold, silver, platinum) — monetary/financial assets driven by real rates, the dollar, and crisis demand — and BASE/INDUSTRIAL metals (copper, aluminum) — industrial inputs driven by global manufacturing and supply cycles. “Metals” as a single thesis category is a category error; the two families’ drivers barely overlap.

How it works / structure

• Specs (gold reference): COMEX 100 troy ounces, physical delivery into licensed depositories, active months on a Feb/Apr/Jun/Aug/Oct/Dec cycle (ms-contract-specs); silver 5,000 oz; copper 25,000 lbs; micro versions exist (instrument-micro-futures).
• Precious-metals pricing: gold carries no yield — its documented primary driver is REAL interest rates (opportunity cost of the zero-yield asset, regime-rate-environments) and the dollar (macro-currency-linkages); the curve sits in near-permanent mild contango (storage + financing, strategy-futures-carry).
• Industrial-metals pricing: copper prices global industrial demand against mine/smelter supply — the “Dr. Copper” growth-gauge folklore has partial empirical support as a coincident indicator, less as a leading one; inventories (exchange warehouse stocks) are the watched supply gauge.
• Inflation-hedge claims: Erb-Harvey (2013) is the discipline — gold’s inflation-hedge property holds loosely at CENTURY horizons and fails at portfolio-relevant ones; the real-rate driver dominates decade-scale behavior.

When it applies

Real-rate and dollar theses (gold as the cleanest real-rate expression outside TIPS); crisis-hedge allocations with the evidence caveats stated; global-growth theses (copper); inflation expression with the Erb-Harvey honesty attached (macro-inflation-linkages).

Risk profile & failure modes

• Narrative surplus: gold attracts more story than any contract — “inflation hedge,” “crisis hedge,” “dollar hedge” are three different, partially contradictory claims; the platform requires WHICH driver a gold thesis claims, with its falsifier.
• Silver’s split personality: half monetary, half industrial, structurally more volatile than gold; gold-silver ratio trades are regime theses wearing a pair’s clothes.
• Squeeze mechanics: deliverable-supply concentration episodes (documented across metals history) detach futures from “fair” value.
• Real-rate regime flips: gold’s driver can be dormant for years then dominant — thesis windows matter.

Evidence & limits

Contract mechanics are exchange-documented. The real-rate/gold relationship is well documented in modern samples; Erb-Harvey (2013) is the canonical skeptical treatment of the popular hedge claims. Copper-as-growth-gauge has coincident-indicator support; leading-indicator claims are weaker. All metals seasonality lore is regime-seasonality-discipline territory.

Falsifiable-thesis examples

Illustrations only, not signals:

• “Gold will rise if 10-year TIPS real yields fall 50bp this quarter (real-rate thesis)” — falsified by the conditional pair.
• “Copper will outperform gold over the next two quarters (global-growth-reacceleration thesis)” — falsified by the ratio.

Cross-references

• Theory home: ext-commodities; drivers: regime-rate-environments, macro-currency-linkages, macro-inflation-linkages
• Curve economics: strategy-futures-carry, strategy-futures-calendar-spread
• Mechanics: instrument-futures-contract, ms-futures-margin, instrument-micro-futures