Paulo Macro — Pick Your Fighter: Precious Metals vs. Copper
"When positioning & sentiment becomes 90% of the game" — he likes gold long-term but won't buy it yet; the washed-out LME copper book, a COMEX inventory sequester and a Chinese squeeze make copper the trade instead.
One-line take: Asked for his precious-metals view, he picks copper — because positioning and flows are 90% of the story and only copper's is clean. Gold: constructive fundamentally but "not ready for primetime" — specs have been adding as gold fell $4,500→$4,000 and are longer now than after the January smash, which "is not what capitulation and a longer-term low looks like." Silver's book is "cleaner" than gold's, but a Risk-Off rupture argues gold outperforms silver (a rising gold/silver ratio hurting silver outright). Copper looks crowded only if you stop at COMEX: Trump's tariff premium (~3% COMEX over LME) has sucked 74% of all world exchange inventory into COMEX, where it is sequestered (the Sprott-uranium analogy); ex-COMEX inventories are "drawing off a cliff," the Yangshan premium is blowing out with copper on the highs (China short metal, buying anyway), and the cash-3m spread has flipped back into backwardation. Meanwhile LME open interest has crashed to 2022 bear-market levels and LME spec net length to 2022-23 washout lows — with copper near all-time highs. Ratio work agrees: copper/gold under 4× implies ~$8/lb and silver/copper over 9.5× reverting to 5-7× implies $8-11/lb versus $6.50 spot. Expression: advanced-explorer / junior-producer equities (large-cap copper at 15x+ fwd PE and 7-8x fwd EBITDA is "rather full") — highly concentrated in ALDE and SURG, with small tracking positions in TGB, NICU and IE. The acknowledged risk: the AI power-buildout names (CAT, ETN, GEV) "have started to break down." "It's times like these when curves start to tighten that I smell an accident and like to rush in."
1. Stocks & names mentioned
| Ticker | Name | Research | View | What's said | Source |
|---|
| ALDE | Aldebaran Resources | SA · STK | Positive | One of two highly concentrated positions in his copper basket (with SURG): "I own a basket with highly concentrated positions in Aldebaran Resources (ALDE CN) and Surge Copper (SURG CN)." The chosen expression of the copper call is advanced explorers / junior producers, "where recent valuations are terribly depressed and discounts have grown extreme vs large-cap copper multiples." Illiquid — "I would not use market orders." | read ↗ |
| SURG | Surge Copper | SA · STK | Positive | The second of his two highly concentrated copper positions (SURG CN, alongside ALDE) — reaffirmed as the junior-producer/advanced-explorer expression of a copper call built on LME positioning, ex-COMEX inventory draws and the ratio work ($8-11/lb implied). Illiquid; no market orders. | read ↗ |
| TGB | Taseko Mines | QT · SA · STK · FA | Positive | Named as one of the "very small tracking positions" alongside the concentrated ALDE/SURG core — "inconsequential size for now," i.e. owned and on the bench rather than a sized bet. Same copper thesis; illiquid, no market orders. | read ↗ |
| NICU | Magna Mining | SA · STK | Positive | Another "very small tracking position" in the copper basket ("TGB, NICU, IE, a few others") — the Sudbury base-metals platform where "copper pays the bills" now carried as bench exposure to the same copper setup rather than a concentrated holding. | read ↗ |
| IE | Ivanhoe Electric | QT · SA · STK · FA | Positive | The third named "very small tracking position" (with TGB and NICU) in his advanced-explorer copper basket — "inconsequential size for now"; illiquid, so no market orders. | read ↗ |
| Codelco | Codelco (Chile, state-owned) | — | Neutral | Supply-side evidence, not a stance: "A compounding issue is Chile. As we saw with Codelco Chairman's comments last week, it's a tough slog" — one of the mine-supply constraints (with sulphur/acid availability via Hormuz) behind 2026 copper supply growth that "rhymes with 'hero'." | read ↗ |
| CAT | Caterpillar | QT · SA · STK · FA | Negative | A bearish chart observation, not a stated short: "the power gen/components/buildout stories like Caterpillar, Eaton, Vernova, etc have started to break down amidst the violent rotation away from semiconductors and a general stagnation in the AI dreamscape." Named as the live risk to the copper trade — "Copper is adjacent to this, and this is a real risk." | read ↗ |
| ETN | Eaton | QT · SA · STK · FA | Negative | Named with CAT and GEV as an AI power-buildout story that "has started to break down" in the rotation out of semis — consistent with his January Rollover-Syndrome short list. An observation offered against his own copper trade, not a fresh short recommendation. | read ↗ |
| GEV | GE Vernova | QT · SA · STK · FA | Negative | Third of the "power gen/components/buildout" names ("Vernova") he flags as having started to break down — the visible evidence that the AI-datacenter demand pillar under copper is wobbling. Cited as a risk, not a short call. | read ↗ |
This is a commodity-positioning note; the securities are the expression, not the argument. ALDE / SURG are the concentrated positions; TGB / NICU / IE are explicitly "very small tracking positions… inconsequential size for now" (plus "a few others" he does not name — deliberately not tabled). CAT / ETN / GEV appear only as broken-chart evidence that the AI buildout narrative is stalling (a risk to the copper trade). ALDE and SURG are TSXV-listed juniors (OTC: ADBRF / SRGXF) — no Qualtrim page, so SA/STK only. Metals themselves (LME/COMEX copper, gold, silver, platinum), the ratios, exchange inventories, the Yangshan premium and research shops (Morgan Stanley, Goldman Sachs) are covered in the talking points, not tabled. Newsletters cited ("Ferg", "Le Shrub") and people (Vinny Daniels, Porter Collins) are captured on the reading list, not here.
2. Talking points
The question, and the rule that answers it
- Readers asked for his view on gold, precious metals and copper. The frame is one he has been building since the Mid-Year Review: USD topping/rolling over on extended positioning, and a fundamental view of another Triple Yasu — USD down, bonds down, equities down / violent chop / Risk Off.
- The decision rule: "If positioning and flows are 90%+ of a story today" then that — not the narrative — settles which metal to own.
Why he is not simply long gold
- Temperamentally he should be: libertarian sympathies amid "ever-growing market distortions, hyperfinancialization, and financial nihilism," and gold as "the ultimate 'opt out'" — Vinny Daniels and Porter Collins at Seawolf: "gold is my therapist."
- But the "insane near-halving of the oil price in 2Q back to pre-war levels" taught him to refuse a trade that is "85% there," or where technicals and fundamentals conflict. Broken momentum, or a chart not confirming a bullish narrative, means stay attuned to positioning and flow above all else. "I see a lot to like in gold (and silver) on the long side, I'm just not there with confidence yet."
The visibility tell — the platinum-2024 rhyme
- He has read many bullish gold notes lately and taken a lot of inbounds. Except for fast-money retail, long-term holders "have not cut back or capitulated and are riding out this drawdown."
- The analog: traders he deeply respects (Ferg and Le Shrub — "both worth subscribing") got very bullish platinum in spring 2024. The theses were valid and fundamentals only improved — but "you had to wait nearly a year" for it to work. "When something suddenly becomes visible among people I respect, I get a little uncomfortable."
Gold positioning — buying the decline, not capitulating
- Two-sided evidence: gold-miner ETFs (especially juniors) have shed AUM since January, but global gold ETF stockpiles rose all through 2025 and are only just starting to roll over. COMEX matters less as physical trade moves to the Far East, but positioning there is still indicative — "this is where I have an entry issue."
- The bullish part: by early June open interest fell to levels not seen since the 2008 GFC — the US market has shrunk a lot. Spec net long by contracts sits mid-range for the decade; $ notional net long is toward the high end.
- The disqualifier: since mid-May gold fell $4,500 → $4,000 while speculators increased their position, and spec length is longer now than after the January smash from $5,400 to $4,700. Managed money net long as a % of OI says the same. "This is not what capitulation and a longer-term low looks like."
Silver — cleaner, but ratio risk in a Risk-Off
- Since June silver has got more interesting: open interest at lows not seen since 2008 and 2011, and net longs approaching early-2024 lows (when silver traded in the low $20s) despite a modest post-smash bounce. As a % of OI there is still "a little more room to go on the downside."
- So spec length in silver is arguably "cleaner" than gold's. The catch is the long-term USD-index vs gold/silver-ratio relationship: in a Risk-Off rupture in the metals, gold outperforms silver (the ratio keeps rising), "which would presumably hurt the silver price outright."
Copper looks crowded — on COMEX
- The bear case is real on the US exchange: spec positioning has grown since Trump's 2024 election and COMEX specs carry nearly $11bn of net long — near the highest in history. As a % of open interest, managed money and non-commercial net longs are "getting pretty stretched" — a configuration that in the 2011-15 bear market flagged near-term tops.
- And with nearly 1mm tons of exchange stocks globally "you would be tempted to think that there is no way copper could trade well." That is the wall of worry he then dismantles.
The tariff sequester — COMEX holds 74% of world exchange inventory
- Trump's tariffs have kept COMEX at a premium to LME since the 2024 election (just shy of 3% now), pulling metal into the US system: ~700k tons on COMEX, so that COMEX now accounts for 74% of all the world's exchange inventory.
- "Like uranium disappearing into the Sprott Trust, this copper is now sequestered" as long as the tariff threat exists — i.e. as long as this administration's economic ideology holds. Back COMEX out and "the global inventory picture changes dramatically."
Ex-COMEX inventories are drawing off a cliff
- Copper inventories have a northern-hemisphere construction seasonality: they normally flatline in 3Q before dropping again in 4Q. Instead, non-COMEX stocks are "drawing off a cliff," declining rapidly relative to the past 15 years.
- Morgan Stanley confirms Chinese inventories drawing faster than normal. And despite China's real-estate/consumer troubles the Yangshan cathode premium is blowing out — the inversion of normal behaviour: usually a LME rally makes Chinese buyers step away and the premium narrows (3Q21, 4Q22, 4Q23 all had the premium opening with LME near a low). "In the current case, China is sucking in tons with copper on the highs."
- The curve is registering it: the cash-3m spread has flipped back into backwardation, with Friday's LME curve above -1wk, -1m and -6m ago.
Supply — 2026 growth "rhymes with hero"
- Morgan Stanley's copper deck notes 2025's supply disruptions and expected growth; for 2026 the growth in copper mine supply "rhymes with 'hero'" (i.e. zero).
- Compounding it: Chile — "as we saw with Codelco Chairman's comments last week, it's a tough slog" — plus sulphur and acid availability (a Hormuz consequence), "a growing problem for miners."
The LME washout — the piece nobody is looking at
- Objection anticipated: "But Paulo — you said you are prioritizing positioning and flows! … COMEX positioning is at extremes!" His answer is to look where the Chinese squeeze is showing up — the LME.
- With copper near all-time highs, LME open interest has crashed this year back to 2022 bear-market territory, and LME spec net long (contracts and $ notional) has crashed to nearly 2022-23 washout levels — the exact opposite of gold, which "has not fully rinsed speculative positioning."
- Conclusion: China appears short copper metal and is competing with the US to suck in stock, "and speculative positioning outside the US comes nowhere close to pricing this." Put COMEX and LME together and the aggregate spec picture "is not particularly extended."
Ratio work — copper/gold and silver/copper both point to $8-11/lb
- LME copper/gold: below 4× ($/t Cu per 1oz gold) copper has tended to perform well thereafter, and once the ratio turns up from a major low it tends to run back toward >5×. With gold at $4,000/oz that implies ~$8/lb copper.
- Silver/copper (1 silver oz : 1 Cu lb, LME pricing) he considers "cleaner" given silver's industrial demand: above 9.5× is an overextension versus the historical 5-7×, and those spikes tend to mark a tradable low for copper (2011 the exception) before reverting to 5-6× for protracted periods. With silver at $58, reversion implies $8-11/lb copper — against ~$6.50 spot.
- The precedent he leans on is Aug-2020: silver ripped $12 → ~$30, the ratio ran ~5× → 10×, copper was already rallying (~$6,500/t) and LME spec positioning was "incredibly net long" — yet copper still went another +50% to $10k/t. Extended positioning did not cap it.
The wall of worry — and the AI-buildout crack
- Beyond the Chinese economy, the most visible worry is the US inventory overhang set against the AI datacenter buildout. Per Goldman Sachs, the "AI Data Center factor" has become a primary driver of copper prices YTD — which cuts both ways.
- The rhyme he can't ignore: tech investors crowding into uranium in 2020-21 as a "value" energy hedge to core growth holdings. And "the power gen/components/buildout stories like Caterpillar, Eaton, Vernova, etc have started to break down amidst the violent rotation away from semiconductors and a general stagnation in the AI dreamscape. Copper is adjacent to this, and this is a real risk. The trade is not 'sleep at night'… but as a buddy once said: do the hard trade."
- His rebuttal is location, not demand: current LME positioning already prices the concern reasonably well, and even if global balances soften on an AI unwind, "the metal is simply in the wrong place." China (and soon the rest of the world) is the short — "and when China comes for something, they really come for it."
Bottom line — the squeeze mechanics
- Gold "in particular is not ready for primetime, and the move it had in 2024-2026 requires more digestion." Copper "has snuck up on people at $6.50/lb" and "the positioning is all wrong."
- The template is silver mid-last year: spec positioning (by contracts) peaked at $40 and then declined as silver ran $40 → $100+ — "the squeeze was all commercial." On the LME today, "open interest is low, and specs don't have longs to sell to commercials if they have to scramble. Where is the paper or physical copper going to come from?"
- The trigger he trades on: "It's times like these when curves start to tighten that I smell an accident and like to rush in."
Investment expression — juniors, not the large caps
- He prefers advanced explorers and junior producers "where recent valuations are terribly depressed and discounts have grown extreme vs large-cap copper multiples currently trading rather full at 15x+ forward PEs and 7-8x fwd EBITDA."
- "This part in particular is not investment advice, but since I know many of you will ask anyway": highly concentrated positions in Aldebaran Resources (ALDE CN) and Surge Copper (SURG CN), plus very small tracking positions in TGB, NICU, IE and "a few others" — "inconsequential size for now."
- Execution warning: "These names are illiquid so I would not use market orders if you think about getting involved. And please do your homework!"
3. In plain English
A jargon-free summary of why each name appears — what it is and why that view. (Plain-language companion to the table above; renders on each ticker's consolidated page.)
ALDE — Aldebaran Resources Positive
Aldebaran is an exploration company sitting on a very large, undeveloped copper deposit in Argentina. It doesn't produce or sell anything yet — you own it for the ore in the ground, on the bet that a bigger mining company eventually pays up for it or that copper gets valuable enough to justify building the mine.
It is one of Paulo's two concentrated copper positions in this note, and the reasoning is deliberately top-down. He argues copper is set up to rise hard because the world's visible stockpiles have been vacuumed into US warehouses by tariffs and can't easily come back out, while everyone else — China especially — is quietly running short of metal. The way he chooses to own that view is not the big miners: those trade at over 15 times next year's earnings, which he calls "rather full." Small explorers like Aldebaran are priced as if copper will stay cheap forever, so they move far more than the metal does when the metal moves. The trade-off is that these shares barely trade: he warns to use limit orders, never market orders, or you will pay a silly price just to get filled.
SURG — Surge Copper Positive
Surge Copper is a British Columbia developer whose main asset (Berg) is a big copper-and-molybdenum deposit — again pre-production, so the value is the resource plus the plan to mine it, not current profits.
It is the other half of Paulo's concentrated pair with Aldebaran, held for exactly the same reason: he thinks the copper price is about to be squeezed higher and wants the highest-torque, cheapest way to own that. His argument for the squeeze is worth restating simply — the traders who normally sit on the "long" side of the London copper market have already sold out (their positions are back to levels last seen in the 2022 crash) even though copper is near record highs. So if physical buyers scramble for metal, there is nobody holding a long position to sell it to them, and the price has to jump to find supply. Small, illiquid shares like Surge are the leveraged expression of that. Same execution caveat: no market orders.
TGB — Taseko Mines Positive
Taseko is an actual copper producer in central British Columbia — it mines and sells metal today, so it's a step less speculative than the pure explorers.
Here it's explicitly a tracking position: a deliberately tiny holding, "inconsequential size for now." Investors use these as a way to stay honest — once you own even a sliver of something you follow it properly, and you have a foothold to build on if the thesis starts confirming. So read this as "on the bench, part of the same copper basket," not as a sized bet like Aldebaran or Surge.
NICU — Magna Mining Positive
Magna Mining operates in Canada's Sudbury basin, a long-established mining district. It's usually described as a nickel story, but in practice copper is what pays the bills today, with the nickel sitting there as free optionality if that metal ever recovers.
In this note it's one of the small tracking positions rather than a core holding — a minor slice of the copper basket, sized so it costs little if the AI-datacenter demand story (one of the things currently supporting copper) does crack. Paulo names that risk openly and owns the position anyway, on the argument that the metal being in the wrong warehouses matters more than a wobble in demand forecasts.
IE — Ivanhoe Electric Positive
Ivanhoe Electric is a US-focused copper explorer built around a proprietary geophysical survey technology it uses to hunt for deposits buried too deep for conventional methods to see — the pitch being that it can find copper others have walked past.
It appears here as the third of Paulo's very small "tracking" positions, bought as part of the same advanced-explorer basket and at deliberately inconsequential size for now. The logic is the basket, not the individual company: if copper does what his positioning analysis says it should, depressed exploration-stage equities are where the largest percentage moves happen — and holding several small ones spreads the risk that any single project disappoints. As with the others, the shares are thinly traded, so he cautions against market orders.
CAT — Caterpillar Negative
Caterpillar makes the heavy machinery and the big generator sets that go into building and powering data centres, so its shares have been traded as an AI-buildout play rather than as a plain industrial.
Paulo isn't recommending a short — he is pointing at the chart as evidence against himself. These power-buildout names "have started to break down," meaning the market is quietly pulling money out of the AI construction theme. Because a meaningful chunk of copper demand is forecast to come from that same buildout, a breakdown here is a warning light for his own copper trade. He names it, calls it "a real risk," and takes the position regardless — "do the hard trade."
ETN — Eaton Negative
Eaton makes the electrical guts of a data centre — switchgear, power distribution, the equipment that gets electricity safely from the grid to the servers. It has been one of the purest listed ways to bet on the electrification and data-centre buildout.
Same reading as Caterpillar: its chart "has started to break down" as investors rotate away from semiconductors and the AI story stagnates. That fits Eaton's earlier appearance on his "Rollover Syndrome" short list — his framework that big tops are slow processes, spotted when a stock stops being able to hold its own 200-day average. Cited here as a caution flag over the copper demand narrative, not as a fresh short recommendation.
GEV — GE Vernova Negative
GE Vernova is the power business spun out of General Electric — gas turbines, grid equipment, wind — and has been a market favourite on the argument that all those AI data centres need enormous amounts of new generating capacity.
Paulo lists it third among the buildout names whose charts have started to break down. The point is diagnostic rather than a call on the company: when the equities that are supposed to profit most directly from the AI power boom stop going up, the market is expressing doubt about the boom itself — and copper has been trading partly on that same expectation. He treats it as the strongest argument against his own trade, and answers it not by disputing demand but by arguing the physical metal is stuck in the wrong place.
Key points extracted from the paid PauloMacro Substack post (saved in transcript.txt) for personal study. Not investment advice. © PauloMacro for source material.