Gold Poised to Surpass Coal as Australia's Second-Largest Export Amid Global Market Volatility

Gold Poised to Surpass Coal as Australia’s Second-Largest Export Amid Global Market Volatility

In a significant shift within Australia’s export landscape, gold is on track to overtake coal as the nation’s second-largest commodity export, following iron ore. According to the Australian government’s latest quarterly commodity forecast, gold export earnings are projected to reach A$56 billion in the 2025-26 fiscal year, compared to A$39 billion for metallurgical coal and A$28 billion for thermal coal. This trend suggests that gold could eclipse coal by 2026-27, reinforcing Australia’s position as the world’s largest net gold exporter. Coal used to be Australia’s commodity export king, but gold is coming

Factors Driving Gold’s Ascendancy

The surge in gold prices is attributed to global economic uncertainty and anticipated U.S. fiscal deficits tied to policies under President Donald Trump’s second term, including tax cuts and major spending bills. If gold prices reach $4,000 per ounce by 2026-27, export revenues could hit A$61.6 billion. Conversely, government coal price forecasts may be overly optimistic, given falling market prices and declining demand from major importers like China and India, along with shifts towards cleaner energy by Japan and South Korea. If current trends persist, gold may indeed eclipse coal in significance within Australia’s export economy. Coal used to be Australia’s commodity export king, but gold is coming

Global Commodity Market Turbulence

Global commodities trader Trafigura has issued a warning of continued “turbulence” in commodity markets for the second half of 2025, citing geopolitical uncertainty, high tariffs, inflationary pressures, and volatile U.S. policy changes. Despite these challenges, Trafigura reported steady net profits of $1.5 billion for the first half of the year, matching the previous year, and increased its dividend payout to shareholder employees from $650 million to $1.5 billion. However, profitability is trending lower compared to the 2022-2023 energy crisis peak. Company executives highlighted growing unpredictability, emphasizing that current volatility—driven by policy rather than supply-demand dynamics—is harder to capitalize on. Trafigura warns of further ‘turbulence’ in commodities markets

Impact of Middle East Conflict on Commodity Markets

The recent 12-day conflict between Israel and Iran in June 2025 highlighted significant shifts in global cross-asset dynamics. Notably, traditional safe havens like the U.S. dollar and Treasury bonds did not attract investor demand, as the DXY index remained at a three-year low and 10-year Treasury yields rose instead of falling. Oil prices surged initially but quickly reverted once supply fears eased. These developments underscore a broader trend away from viewing the U.S. as a global safe haven and reflect the underperformance of U.S. equities relative to international markets. Commodities are emerging as a strong contender for future outperformance due to improving global economic indicators, the U.S.’s “run hot” economic policy, and technical market signals. With commodities historically underperforming relative to equities, recent global dynamics may signal a breakout, especially if dollar weakness and global growth continue. MidEast war highlights key cross-asset trends to watch

Challenges in the Copper Market

Copper smelters are grappling with a significant market and pricing crisis, as they are now paying miners to process copper concentrates due to negative treatment and refining charges (TCRC). Traditionally a revenue source for smelters, TCRC has remained negative in both spot and mid-year negotiations, reflecting an imbalance driven by excessive smelting capacity, particularly in China. While global mine production has grown modestly, it cannot keep pace with new processing facilities, leading to a supply-demand mismatch. Though by-products like sulphuric acid and precious metals offer some financial relief, copper is no longer the primary income stream for smelters. China’s aggressive expansion of its smelting sector has inflated refined copper production, while tightening margins have already forced some Western smelters to halt operations. Compounding the problem, countries like Indonesia are halting concentrate exports, worsening supply conditions. The current pricing model—reliant on annual or semi-annual contracts—appears outdated, as it fails to adapt to market volatility. There is growing pressure to shift towards more dynamic pricing mechanisms, such as quarterly or spot pricing, to better reflect real-time supply-demand conditions and prevent further financial strain on smelters. Copper smelters are facing both market and pricing crises

China’s Commodity Import Decline

In May 2025, China experienced a decline in imports of major commodities including crude oil, coal, iron ore, and copper, signaling potential economic concerns in the world’s second-largest economy. Only natural gas imports showed a marginal monthly increase, although they remained down year-on-year. Crude oil imports fell to 10.97 million barrels per day, down from April and March figures. Iron ore imports dropped to 98.13 million tons, while coal and unwrought copper imports also declined significantly in both monthly and yearly comparisons. These reductions may reflect a combination of sluggish domestic growth, especially in construction, and the impacts of fluctuating global commodity prices. Crude oil and copper markets saw volatility influenced by global price trends and geopolitical factors such as U.S. sanctions and anticipated tariffs. Copper shipments, for instance, shifted toward the U.S. amid tariff expectations. Meanwhile, strong domestic coal production and low local prices reduced import needs. Analysts caution against overinterpreting monthly fluctuations, which are often influenced by timing and price dynamics when cargoes were secured. There is optimism that upcoming Chinese economic stimulus measures could spur future demand for imported commodities. China’s imports of major commodities hiccup in May

Conclusion

The global commodity market is undergoing significant transformations, with gold poised to become Australia’s second-largest export and various geopolitical and economic factors contributing to market volatility. Stakeholders must remain vigilant and adaptable to navigate these evolving dynamics effectively.