Two charts show copper price drop may have been overdone

By Frik Els 

2022.08.24

Copper is on track for its worst monthly run of losses since 2015, with another steep decline so far in August. Although off its recent lows, large-scale speculators in the copper market like hedge funds have held net short positions – bets on falling prices – for six weeks running.

A global energy crisis centred in Europe, a slump in China – particularly the crucial property and construction sector – inflation and fears of a recession in the US and a surging dollar have been assigned blame for all the gloom in the copper market at the moment. 

Copper’s short term woes frequently butt up against its longer term tailwinds, thanks to its central role in the green energy transition, making accurate forecasting difficult if not impossible.

Bewarehouses 

In particular, tracking Goldman Sachs’ trajectory on the copper market has been something of a white knuckle ride. 

In February the investment bank predicted a “scarcity episode” by the end of the 2022 as global stocks fell to dangerously low levels. 

In April, Goldman forecast copper reaching an all-time high before the end of 2022 because the market was “sleepwalking towards a stock-out.” 

In July, with the price falling to a 20-month low, the firm’s analyst conceded that their great expectations for copper in the short term will have to be postponed. 

But Goldman’s main argument of the dangers of a “scarcity episode” or a “stock-out” remains well supported. 

Frik Els – Mining.com author