International Institutions: Copper Prices Are Expected To Hit A New High in Three Months

Strategists led by Nikolaos Panigirtzoglou believe that although allocations are above historical averages, they are not too high, suggesting that raw materials have room to rise.

 

Prices of everything from oil to wheat have risen since the Russian-Ukrainian conflict, with many hitting record highs last month. That has further boosted already high global inflation, and the Federal Reserve has responded more forcefully, prompting investors to weigh reweighting assets among stocks, bonds and raw materials in their portfolios.

 

On April 6, JPMorgan Chase strategists wrote in their investment tips, "Under the current situation, the demand for inflation hedging has risen, and it is obvious that the global long-term commodity allocation will eventually exceed 1% of total financial assets, reaching a new high." . Other things being equal, "this means that there is still a 30%-40% upside in commodity prices from now on."

 

Commodity prices have risen across the board this year, with energy, metals and food prices leading the way. Brent, the global benchmark for crude, rose more than 30% to hit its highest level since 2008 last month.

 

Among the major banks, Goldman Sachs has been bullish on raw material prices, especially as a hedge against inflation. On April 7, Goldman Sachs warned that volatility in the global copper market was inevitable.

 

This isn't the first time Goldman has warned. In February, Goldman Sachs proposed that the copper market has entered a "shortage cycle". By the end of the year, global copper inventories may drop to 200,000 tons, which can only meet global copper demand for three days.

 

Goldman Sachs pointed out that copper supply and demand have shown an "extreme reversal", and copper inventories on global exchanges in March appeared "seasonally not rising but falling" for the first time in 10 years.

 

 

The bank doubled its forecast for the copper gap this year to 374,000 tonnes, and forecasts the gap will continue to widen over the next two years.

 

"Without realistic and effective buffer measures, we believe that the rise in copper prices is inevitable: on the one hand, the supply of scrap copper needs to be greatly increased, and on the other hand, market demand needs to be reduced."

 

"Despite the positive factors of these tight markets, copper prices have risen limitedly this year, and positions have not changed much, providing an opportunity for investors to do more."

 

Copper prices have retreated since the international copper price exceeded $5/lb ($11,000/ton). The intraday all-time high on March 7 was mainly due to the fact that copper inventories fell to an all-time low.

 

Goldman Sachs also raised its copper price target for the next three, six and 12 months, and expects a new high in three months and a climb to $13,000 a ton within a year.

 

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