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XMFSinchiruna (26.56)

You Are Cleared for Re-Entry into Copper



May 26, 2011 – Comments (4) | RELATED TICKERS: CU.DL , FCX , TGB

Now, just weeks after sounding the alarm, Goldman Sachs is back to sound the all-clear for commodities; particularly copper, zinc, and oil. With that call, Goldman reiterated the very same 12-month price target for copper ($11,000 per ton) that the bank initially forecast back in December, and called the malleable metal "an attractive opportunity." One might reasonably interpret the past six months, then, as something of a head-fake that inserted a pause into the long-term upward trend.

You Have Been Cleared for Re-Entry into Copper

After closing my silverminer CAPS pick for the Global X Copper Miners ETF on April 8 (days before Goldman Sachs issued its short-term bearish call), and locking in a 13.85% nominal gain after four months, I am now re-opening the play by adding the First Trust ISE Global Copper Index Fund to my CAPS portfolio. (Ticker symbol CU). Upon closer inspection, I consider CU a better vehicle than the COPX, though on any further near-term weakness I will look to add the COPX and additional copper picks as well.

Please note, Goldman did express the possibility for additional near-term softness in Chinese demand. As in most cases, I recommend a gradual approach to entry.

4 Comments – Post Your Own

#1) On May 26, 2011 at 11:51 AM, reinman60 (< 20) wrote:


I'm also bullish on the long term prospects for copper. The infrastructure build out in developing economies is a secular story that will continue for years, despite bumps along the way.

I do disagree with this, however: " Ever the uncanny oracle for anticipating near-term market swings".  Rather than anticipating these swings, I think Goldman causes them.  Whether the prop desk is front running the research department is open to question, but its hard for me to believe that this isn't happening to some extent.

Interesting discussion pertaining to oil, but relevant to copper as well.

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#2) On May 26, 2011 at 12:34 PM, TMFAleph1 (91.86) wrote:

I'm bearish on copper, at least in the short-term. Over a longer term horizon, Jeremy Grantham is probably right that there has been a secular shift upward in commodity prices, but it's not clear that this applies to copper, which is being replaced with different metals/ solutions across a broad swathe of applications.

For more on that last point, see this very interesting presentation by copper market analyst Simon Hunt to the 6th Annual China Copper & Aluminum Summit, which took place in Shanghai last week.

On a short-term basis, Hunt said this week that "we could see prices rise to around 9500 and then begin falling to at least 7500 by October."

It will be fascinating to watch things play out in the copper market over the coming months/ years.

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#3) On May 26, 2011 at 12:45 PM, XMFSinchiruna (26.56) wrote:


I have no doubt that Goldman and other players are juicing the commodities markets to their favor, but that still does not alter the fact that Goldman's calls remain among the more predictive compared to its peers.


Interesting counter ... thanks for that. I'll have at Hunt's presentation.

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#4) On May 26, 2011 at 12:45 PM, XMFSinchiruna (26.56) wrote:

.. have a look at   :)

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