Goldman Sachs Predicts Copper Prices to Rally Despite Recent Market Pullback
Tuesday, Sep 3, 2024 6:36 pm ET
2min read Goldman Sachs (GS) fell by 4.47%.
Goldman Sachs analysts Samantha Dart and Daan Struyven predict that the average copper price next year will be $10,100 per ton. Although the bank ended its long-term bullish recommendation without reaching the previous price target, Goldman Sachs stated it might re-establish this position later, as it still believes the market will face a severe supply shortage.
Goldman Sachs shifted its stance on copper prices, exiting its long-term bullish position and lowering its 2025 price forecast by nearly $5,000 due to a decrease in demand.
Goldman Sachs had been one of the most significant copper bulls. Analysts Samantha Dart and Daan Struyven recently forecasted an average copper price of $10,100 per ton for next year, a figure above the current price on the London Metal Exchange of roughly $9,200 but lower than their previous target of $15,000 per ton.
The $15,000 per ton target was supported by former analysts Jeffrey Currie and Nicholas Snowdon. In May, the price of copper spiked to a new high of over $11,000 per ton as substantial funds flowed into the market. Currie described the metal at the time as the best trade he had ever seen due to rapid transitions to electrification, including electric vehicles and AI-powered data centers, and the manufacturing reshoring trend, partly driven by anticipated supply shortages. Additionally, there were concerns about declining mine supplies.
Since then, copper prices have fallen by about 18%. Goldman Sachs noted that the increase in Asian inventories and a rare surge in copper exports had sparked concerns about demand. On Tuesday, the bank stated it took a more selective and cautious tactical view on commodities.
"In the copper market, Chinese inventories typically decline in the second quarter, but this year they have increased. Pre-COVID, China usually accounted for two-thirds of the growth in global commodity demand. We think that without strong Chinese demand, a significant scarcity in the market is challenging."
Currently, copper inventories in the Asian region of the London Metal Exchange have soared to their highest level since 2016.
Although Goldman Sachs ended its long-term bullish recommendation without achieving the previous price target, its analysts stated that customers could still gain a 41% return from this trade. Goldman Sachs also mentioned it might re-establish this position later, as the firm still considers that the market will face a severe supply shortage.
"We still hold that the growth in green metals demand, copper's long-term cyclical characteristics, and reduced investments will ultimately lay the foundation for inventory reductions and hence scarcity pricing."
Furthermore, Goldman Sachs lowered its 2025 aluminum price forecast from $2,850 per ton to $2,540 per ton. It maintained a bearish outlook on iron ore and nickel and described gold as its preferred instrument for hedging geopolitical and financial risks in the near term.
Goldman Sachs stated, "Gold is our most confident short-term commodity for price increases." The bank kept its 2025 early-year target of $2,700 per ounce, predicting that expected Fed rate cuts would drive Western institutional inflows into the precious metal, with ongoing robust demand from central banks providing further support.
Goldman Sachs analysts Samantha Dart and Daan Struyven predict that the average copper price next year will be $10,100 per ton. Although the bank ended its long-term bullish recommendation without reaching the previous price target, Goldman Sachs stated it might re-establish this position later, as it still believes the market will face a severe supply shortage.
Goldman Sachs shifted its stance on copper prices, exiting its long-term bullish position and lowering its 2025 price forecast by nearly $5,000 due to a decrease in demand.
Goldman Sachs had been one of the most significant copper bulls. Analysts Samantha Dart and Daan Struyven recently forecasted an average copper price of $10,100 per ton for next year, a figure above the current price on the London Metal Exchange of roughly $9,200 but lower than their previous target of $15,000 per ton.
The $15,000 per ton target was supported by former analysts Jeffrey Currie and Nicholas Snowdon. In May, the price of copper spiked to a new high of over $11,000 per ton as substantial funds flowed into the market. Currie described the metal at the time as the best trade he had ever seen due to rapid transitions to electrification, including electric vehicles and AI-powered data centers, and the manufacturing reshoring trend, partly driven by anticipated supply shortages. Additionally, there were concerns about declining mine supplies.
Since then, copper prices have fallen by about 18%. Goldman Sachs noted that the increase in Asian inventories and a rare surge in copper exports had sparked concerns about demand. On Tuesday, the bank stated it took a more selective and cautious tactical view on commodities.
"In the copper market, Chinese inventories typically decline in the second quarter, but this year they have increased. Pre-COVID, China usually accounted for two-thirds of the growth in global commodity demand. We think that without strong Chinese demand, a significant scarcity in the market is challenging."
Currently, copper inventories in the Asian region of the London Metal Exchange have soared to their highest level since 2016.
Although Goldman Sachs ended its long-term bullish recommendation without achieving the previous price target, its analysts stated that customers could still gain a 41% return from this trade. Goldman Sachs also mentioned it might re-establish this position later, as the firm still considers that the market will face a severe supply shortage.
"We still hold that the growth in green metals demand, copper's long-term cyclical characteristics, and reduced investments will ultimately lay the foundation for inventory reductions and hence scarcity pricing."
Furthermore, Goldman Sachs lowered its 2025 aluminum price forecast from $2,850 per ton to $2,540 per ton. It maintained a bearish outlook on iron ore and nickel and described gold as its preferred instrument for hedging geopolitical and financial risks in the near term.
Goldman Sachs stated, "Gold is our most confident short-term commodity for price increases." The bank kept its 2025 early-year target of $2,700 per ounce, predicting that expected Fed rate cuts would drive Western institutional inflows into the precious metal, with ongoing robust demand from central banks providing further support.
