- Copper, which is used in everything from power to construction, has risen more than 22% this year, on pace for its best year since 2017.
- "This current price strength is not an irrational aberration, rather we view it as the first leg of a structural bull market in copper," Goldman Sachs said.
- The investment bank believes the speculative length in the rally is still "some way from its limit."
LONDON — Analysts at Goldman Sachs believe copper prices could soon test their existing record highs, saying the bull run for the industrial metal is now "fully underway."
Copper prices on Tuesday rose to their highest level since March 2013, touching $7,719 per metric ton following stronger-than-anticipated manufacturing activity in China and South Korea.
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The metal has since pared gains, with three-month copper futures on the London Metal Exchange last seen trading at $7,626 per metric ton.
Copper, which is used in everything from power to construction, has risen more than 22% this year, on pace for its best year since 2017. Prices have been boosted by supply disruptions, hopes for "green" economic stimulus and China's swift recovery from the coronavirus crisis.
"The bull market for copper is now fully underway with prices up 50% from the 2020 lows, reaching their highest level since 2017," Goldman Sachs analysts said in a research note Monday.
"This current price strength is not an irrational aberration, rather we view it as the first leg of a structural bull market in copper."
Goldman analysts raised their 12-month forecast for copper to $9,500 per metric ton, up from a previous estimate of $7,500.
The Wall Street bank said it now expects a sustained, higher average price for 2021 and 2022. It has estimated copper prices will average around $8,625 next year, before climbing to an average of $9,175 in 2022.
By the first half of 2022, Goldman analysts said, it is "highly probable" copper would test the existing record highs of $10,170 set in 2011.
The bullish prediction comes at a time when investors are increasingly optimistic over coronavirus vaccines.
It is hoped a safe and effective coronavirus vaccine could help bring an end to the Covid pandemic that has claimed over 1.48 million lives worldwide and wiped out a chunk of the global economy.
In addition to vaccine hopes, a weaker U.S. dollar has lent further support to copper prices in recent months. Copper prices had slumped to $4,600 per metric ton in March.
Analysts at Goldman cautioned that copper's path to $10,000 would not be without its hurdles, citing a seasonal slowdown in demand and several periods of price consolidation among other factors.
However, the investment bank believes the speculative length in the rally is still "some way from its limit," adding that significantly higher copper prices would be needed to incentivize new supply and help balance the market over the coming months.