A surge in demand for critical metals from the artificial intelligence and defense sectors is set to see gold and copper prices soar to record highs this year, Goldman Sachs says.

In a report, the investment bank said a combination of technological, geopolitical and economic factors have paved the way for the start of a commodities bull market that will see copper prices hit highs of $12,000 a ton and gold prices hit $2,700 an ounce by the end of 2024.

Goldman Sachs said the world is on course to see the start of a “5D Bull Market” where commodity prices soar due to a combination of disinvestment, decarbonization, de-risking, data centers, and defense spending.

The bank explained the rise of AI technologies, the buildout of new data centers, increased levels of defense spending, and the global green transition will all drive up demand for metals including copper, aluminum, lithium, cobalt, and nickel.

This is set to see the prices of those metals surge over the coming year as the market becomes increasingly tight as a result of low supplies, caused by a long-standing dearth of investment in new capacity.

The bank noted that investment in new commodity production capacity has been low since the mid-2010s as a result of the poor returns generated over the previous decade and the increases in the cost of capital driven by environmental, social, governance (ESG) concerns.

At the same time, the proliferation of AI technologies and the buildout of new data centers to support those technologies is expected to drive up copper demand at rates of 6% per annum between now and 2030, the bank said.

A sharp increase in global defense spending due to mounting geopolitical tensions will also drive up demand for copper and other metals including silver, steel and uranium, the bank said, as it noted defense spending increased 7% to record highs of $2.3 trillion in 2023.

More broadly, the global green transition will drive up demand for critical metals that are required to electrify infrastructure and create the batteries that are used in electric vehicles, Goldman Sachs said.

All of this is set to be paired with a push by investors to de-risk their portfolios and hedge themselves against mounting geopolitical tensions and wider economic uncertainty, by investing heavily in commodities such as gold.

“After a trade war, a pandemic, and ongoing wars in Ukraine and the Middle East, policymakers, companies, and investors are focused on managing and hedging geopolitical risks to supply chains and portfolios,” the bank said.