Copper Rally Pauses as Goldman Sachs Warns of Near-Term Correction
The bank suggests speculative froth has pushed prices beyond current fundamentals, even as it maintains a bullish long-term outlook amid structural supply deficits.
A blistering rally that took copper to all-time highs may be running out of steam, with analysts at Goldman Sachs warning that a price correction is imminent. The influential bank has cautioned that the red metal's powerful surge has been fueled more by financial speculation than immediate physical demand, setting the stage for a potential pullback.
Copper prices have been on a torrid run in 2024, with futures on the London Metal Exchange (LME) surging more than 25% to break above $11,000 per tonne for the first time. The ascent was driven by a compelling narrative centered on tightening supply, including the shutdown of First Quantum Minerals' Cobre Panama mine, and expectations of soaring demand from the green energy transition and power-hungry AI data centers.
However, in a note to clients, Goldman Sachs contended that the rally has moved too far, too fast. The bank fears a correction is coming, stating that "most of copper's rally has happened," according to a MarketWatch report. The core of their argument is that the wave of speculative investment has created a disconnect with the on-the-ground reality of physical copper markets, which have yet to show the same level of tightness.
This call for a near-term pullback adds nuance to the bank's otherwise positive long-term view. Earlier in May, Goldman analysts had significantly raised their year-end copper forecast to $12,000 per tonne, up from $10,000. Their long-range models project copper could reach $15,000 by 2025, propelled by what they describe as accelerating scarcity and a looming structural supply deficit. "Robust global demand from grid and power infrastructure, coupled with investments in strategic sectors like artificial intelligence (AI) and defense, contributed to the upward price momentum," Goldman Sachs noted in a research brief.
The divergence between the short-term warning and the long-term bullish thesis highlights the complex forces shaping the market for the metal often called 'Dr. Copper' for its purported ability to diagnose the health of the global economy. While investors have been buying into a future of constrained supply and high-tech demand, current indicators from China, the world's largest consumer, have been mixed, failing to provide a clear justification for the price spike.
Should a correction materialize, it would impact the mining giants that have ridden the wave of high prices, such as Freeport-McMoRan (FCX) and Southern Copper Corp. (SCCO), whose shares have climbed sharply this year. For the broader market, the question is whether copper's recent rally was a prescient bet on future growth or a speculative bubble now facing a reality check. Investors will be closely watching inventory levels on global exchanges and manufacturing data from China for the next signal.