Changes in the outlook for copper's supply-demand balances that drove a recent rally in prices support a more "bullish" environment for the metal at least to mid-2017, Goldman Sachs said in note.
"Although it is tempting to blame this on speculative positioning, the materially stronger fundamental developments that contributed to this surge in speculative interest are likely to underpin a more bullish environment for copper," Goldman analysts wrote in a note dated on Sunday.
"The improvement in demand growth was much stronger than we had anticipated and appears likely to absorb much of the 'wall of supply' that we had expected would drive prices lower during 2H16 and early 2017," the bank's analysts said.
With the recent pick-up in industrial activity, the 2017 outlook for the key drivers of copper pricing - supply, demand and cost structure - have all become more bullish, they said.
Producer prices in China, the world's top metals consumer, rose at their fastest in more than five years in November as prices of coal, steel and other building materials soared.
Upbeat factory readings from China, the United States and Europe all suggest the global economy may be slowly reflating.
The investment bank said it was forecasting a moderate copper deficit of around 180,000 tonnes for 2017, flipping from earlier estimates of a 360,000-tonne supply surplus.
Goldman expects prices to rise to $6,200 a tonne over the next six months, lifting its 3, 6 and 12-month forecasts to $5,800, $6,200 and $5,600 a tonne, respectively from $5,000, $4,800 and $4,800.
Three-month copper on the London Metal Exchange was up 0.8 percent to $5,872 a tonne by 0344 GMT, while the most-traded copper contract on the Shanghai Futures Exchange was up 1.7 percent to 47,890 yuan a tonne.