January 2012 | Base Metals
Copper back at $8,000, but don’t rule out seeing sub-$6,000 yet
We are not being lulled into a false sense of security by the strong copper prices over the past week. There is a case for seeing prices at much lower levels – even deep beneath $6,000/tonne – before things get better.
Copper had a strong week, with prices recovering back above $8,000/tonne for the first time since late October. Copper may have benefitted from buying associated with new year fund allocations and the commodity index reweightings season. We have also heard talk of investors shifting out of euros and into assets with intrinsic value, which would include certain favoured commodities, of which copper is one. A strong gold price and a plunging euro last week, lend support to this theory.
So has copper turned a corner? Have we been too bearish in our recently revised forecasts that see prices averaging $7,600/tonne in Q1 2012 and $8,025/tonne for the full year? We think not. Moreover, we would advise against getting lulled into a false sense of security by the latest price rally.
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