Forecast: Copper Ready for Rally to $11,000 in 2011
Previous year was very positive for commodities, including copper. In fact, by the end of the year copper managed to rally even during times when all other commodities were losing strength. This trend has changed recently as copper joined slump of metals and other assets in face of the US dollar’s rally. Is this a beginning of long way down for copper or this is just a small correction before another jump to records?
The same fundamentals that have helped copper to rally in the previous year should bolster the metal in 2011. As global economy gradually recovers, so does demand for copper. According to the International Copper Study Group, world consumption of the industrial metal rose 8 percent in the first three quarters of 2010, while mine production increased just 0.8 percent and refined production grew 5 percent. Exhaustion of copper mines reduces mine output, while technical problems and political tensions curb refined production. As for demand, China remains the major consumer of the metal and its economy continues to show an impressive growth, spurring demand for copper.
Despite all the good signs, there are some reasons for concern. As Dian L. Chu (Chartered Economist) suggested, China’s tightening measures may cause decline of demand for copper. Besides, there’s a speculation that Chinese copper inventories are much larger than estimated. It’s believed that huge amounts of the metal simply aren’t reported. China’s demand isn’t the only reason to worry as any noticeable slowdown of economic recovery, be it because of Europe’s debt crisis or because of any other various reasons, may hurt demand for copper badly.
Even considering all possible problems, most economists remain very bullish on copper. The Goldman Sachs promises that the metal will rise to $11,000 per metric ton this year. Copper Investing News provides several forecasts, some more cautious, promising $10,000 as a target, yet Francisco Blanch, head of Global Commodities Research at Bank of America Merrill Lynch, predict $11,250 as a possible price in 2011.
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