Metal surge exacerbates inflation concerns in the U.S.! Barclays estimates: for every 10% increase in metal prices, CPI rises by 0.3%

At the beginning of 2026, the global market witnessed an astonishing metal frenzy, which is not only a revaluation of asset prices but also a macro inflation signal that has been severely underestimated by the market. Barclays' latest research report points out that the inflation market is currently underpricing the risk of a surge in metal prices.

According to the Wind Trading Desk, on January 3, Barclays stated that if there is a sustained 10% shock in metal prices, it will raise the nominal CPI by about 0.3 percentage points within two years and the core CPI by about 0.2 percentage points. Although the direct transmission effect seems mild, in the current extreme situation where silver has surged by 150%, this cumulative effect cannot be ignored.

The current market narrative is confused by the decline in oil prices, leading to inflation swaps and forward markets failing to fully account for the upside risks brought by metals. For investors, this means that the current cost of inflation hedging may be underestimated, and the distribution of inflation expectations is undergoing a substantial rightward shift (towards higher inflation).

Metal Frenzy: A Shocking Start to 2026

Since the beginning of 2026, the basic and precious metals markets have not operated as traditionally expected, but instead have staged a comprehensive and dramatic rebound, pushing multiple sectors close to or beyond historical highs. Since January 1, 2025, even after a recent significant sell-off, silver has risen by more than 150%; gold has increased by 80%; tin has risen by 60%; copper has increased by 50%; and aluminum has risen by 20%.

Barclays points out that the background of this price behavior is extremely complex, including a shift in preferences among foreign reserve managers, easing financial conditions, concerns about the depreciation of the dollar, and the global process of "de-dollarization." Although there has been some recent pullback, this round of revaluation has raised profound questions about cyclical fundamentals and macro signals.

Transmission Mechanism: A Hidden but Deadly Inflation Driver

Many investors mistakenly believe that direct purchases of metals by households are minimal, thus limiting their impact. Indeed, the direct consumption of primary metals by American households accounts for a negligible proportion (less than 0.01%), far lower than gasoline (2.0%) or electricity (1.6%). However, this view overlooks the extremely important indirect transmission chain.

Barclays' analysis indicates that industrial metals are key upstream inputs for manufacturing and construction. Although they only account for 1-2% of total U.S. output, their share in total manufacturing output is as high as 8-10%. Specifically, in the PCE (Personal Consumption Expenditures) price index, the total risk exposure of metals is about 2.2%, with new cars and light trucks accounting for nearly 60% of the share, and appliances, packaged food, and jewelry also being significantly affected.

By constructing a structural VAR model, Barclays quantified the lagged effects of this shock:

1. Transmission Lag: The average response of the PPI to shocks in metal prices lags by about 8 months, while the peak impact on the CPI occurs about 24 months after the shock.

2. Quantified Impact: A sustained 10% shock in metal prices will raise the nominal CPI by 0.2 percentage points after 12 months, reaching a peak of 0.3 percentage points at 24 months; The core CPI rose by approximately 0.2 percentage points during the same period.

This indicates that the current surge in metal prices is not merely a one-time price fluctuation, but will continue to permeate the consumer end over the next two years.

Macroeconomic Divergence: Copper and Oil Disparity Masks Real Risks

The most perplexing contradiction in the current macro narrative is the severe divergence within commodities.

In the past year, copper prices have risen over 35%, while crude oil prices, another key industrial commodity, have fallen by 15%. This divergence suggests that the rise in metals is not simply a "dollar depreciation" story, but is underpinned by deeper supply and demand logic. Copper is structurally supported by AI infrastructure construction, transportation electrification, and supply disruptions in places like Chile and the Democratic Republic of the Congo. In contrast, the oil market has seen a relief in supply disruptions, and capacity constraints are not urgent; Barclays believes that due to overcapacity, it will be difficult for oil prices to sustainably rebound above the reset cost of $80 per barrel.

This divergence brings a dangerous macro signal misinterpretation: the market is underestimating inflation risks due to weak oil prices. However, unlike oil and gas, which are constrained by storage limitations, metal prices can decouple from their marginal costs over a longer period. If U.S. copper imports remain high under tariff threats and strategic reserves, the elevated metal prices will be highly resilient, thereby reinforcing inflation signals, even if oil prices remain subdued.

Market Pricing: Severe Lack of Inflation Risk Premium

Finally, the most critical investment insight lies in the pricing deviation in the inflation market.

Since early December 2025, the Bloomberg Industrial Metals Index has risen by about 10%. According to the aforementioned model, this should lead to a roughly 20 basis point upward adjustment in one-year CPI pricing. Although market pricing has indeed risen by about 20 basis points (for December 2026 CPI), approximately half of this is explained by the rise in WTI crude oil futures. This means that after excluding energy factors, the market has not fully accounted for the inflation transmission brought about by the surge in industrial metals.

A deeper issue lies in the forward market. From 2014 until the pandemic, inflation swaps (such as the three-year inflation expectation two years out, 2yfwd3y) were highly correlated with industrial metal price trends. However, since the pandemic, this relationship has broken down, and statistical significance has significantly declined.

Barclays emphasizes that copper, silver, gold, tin, and aluminum have all surged to multi-year highs, making inflation risks evident, yet the market has failed to provide sufficient inflation risk premium. In the macro context of dollar depreciation concerns, massive fiscal deficits, labor supply shocks, and soaring metal prices, the risk distribution of inflation expectations should logically shift upward to the right. For investors, the current inflation market pricing may be overly "complacent," failing to reflect the potential inflation runaway risks behind the revaluation of physical assets