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Goldman Sachs Bullish on Copper

Bullish on Lower Price

Written by Erik Neilson
Posted April 23, 2013 at 4:50PM

With gold soaking up a lot of attention in the media as of late, investors the world over are paying close attention to metals as a whole. Anyone who has followed copper in recent months knows that analysts are taking a bearish approach to the metal, although it appears this is not an across-the-board assumption.

According to Bloomberg, Goldman Sachs (NYSE:GS) continues to remain bullish on copper, even if the numbers as of late don’t exactly show the metal as an exceptionally good investment.

copper tubes sidebarCopper was directly affected in a negative manner last week due to the gold sell-off, with Goldman's three month estimate falling from $8,000 to $7,500 per metric ton. This comes after copper has dropped 13% in value this year, a number that has many investors nervous about approaching the metal in the future.

Goldman Sachs isn’t about ready to trade in its approach on copper, however. The bank believes that the sell-off of copper last week was “overdone” and that the bearish approach many are taking to copper at the moment is an example of how speculation over future pricing can affect a market.

Much of the issue with copper as of late comes from the fact that purchases from China have been on the downturn. Since China’s economy works in a cyclical manner, however, Goldman Sachs believes that what the market is experiencing at the moment isn’t necessarily a trend that will continue to affect copper for years to come, but rather a bump in the road that will quickly iron itself out.

Remaining Bullish

Because copper is so often used for industrial purposes, the economies of China and other high-profile buyers always need to be taken into consideration when working to predict the future of the market.

China’s economic growth has indeed shown signs of slowing, although this is not to say that the nation’s copper demand will slow as well. As China continues to working towards becoming more and more industrialized, copper and other similar resources will remain necessary.

It’s interesting to note that even though Goldman Sachs has cut its price forecast on copper, it is still remaining bullish on lower prices. GS seems to be banking on the fact that copper could increase in value in the near-term, and that the downturn seen recently is not likely to continue for long.

This comes at a time when GS continues to remain bearish on gold, which has many putting all the more faith in its estimates for copper.

Looking Towards Copper Investing

While the current situation with copper might be enough to deter certain people from investing in the metal, doing so may not actually be a bad idea at all.

Naturally, lower prices have caused certain individuals to believe copper is no longer a worthy investment, but they could also serve as the perfect entry-point for those who are looking to jump on board with copper and stick with the metal for at least the near-term.

Long-term copper estimates are, of course, in flux, and it’s difficult to tell where things will lay in the years to come. For now, however, Goldman Sachs believes copper is more than worth paying attention to.

One of the most enticing elements of copper is that there are a variety of different routes for investors. ETFs, for example, can be excellent investment opportunities in regards to copper, especially if the metal does indeed experience a resurgence in the near future.

Mining companies that deal specifically with copper may also be well worth the focus, as the industry could see a great deal of growth in the future if things work in the metal’s favor.

In a time where metals such as gold, copper, and silver are experiencing pricing fluctuations that haven’t been seen in quite a while, it can be difficult to determine exactly where one should focus one's efforts. While plenty of analysts believe that copper should be viewed bearishly, Goldman Sachs is unlikely to stray from its bullish approach.

And given the bank’s track record, it may just be worth taking this advice to heart.


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