Goldman Goes For The Trifecta: Lowers 2011 Copper Price Target From $11,000 To $9,800/mt; Gold, Silver Next?

Tyler Durden's picture

Following two consecutive commodity downgrades which killed crude and all commodities, which led many to wonder just how many pictures of Lloyd Blankfein at Scores does Bill Dudley have locked up in his office, the bank, whose primary M.O. is to push inflation, has just released one more deflationary report, this time cutting the last man, er doctor, standing: copper. From Goldman: "We are pushing out our $11,000/mt target to 2Q2012 and lowering our 2011 year-end copper price target to $9,800/mt from $11,000/mt. Accordingly, we recently closed our long December 2011 copper trade recommendation – first opened on October 4, 2010 – for a gain of $1,872/mt. We are also raising our 3-month forecast to $9,300/mt, and 6-month forecast to $9,600/mt." And with this we can now scratch Scores, and move on to The Bunny Ranch. Incidentally, this means gold and silver are next. You have been warned.

From Goldman's Joshua Crumb:

We have updated our copper balance and price forecasts for 2011 and 2012. We now believe that prices will likely remain rangebound in 2011 and that risk has become more symmetric given our view that inventories are unlikely to draw down to critically low levels before 2012. However, we believe that a price spike has been deferred, not avoided, and maintain our 12-month forecast of $11,000/mt.

Draw in inventories to critically low levels has likely been deferred

Copper prices rallied sharply in the past week, heading back toward the top of the recent trading range between $9,300/mt - $10,000/mt that has held for much of the year. While we had expected prices to move decisively out of this range to the upside heading into late 2011, we now believe that prices will most likely remain rangebound and that copper price risk has become more symmetric as opposed to skewed to the upside. Underpinning this shift is our view that modestly slower-than-expected copper demand growth owing largely to Chinese consumer destocking, tighter inventory management and the negative supply shock resulting from the earthquake in Japan will likely delay the drawdown in copper exchange inventories to critically low levels. However, as we expect demand to continue to outpace supply, we now forecast a drawdown to critically low levels during 2Q2012.

Price spikes likely no longer needed to balance the market in 2011

The avoidance of stockout suggests that price spikes will no longer be required to ration demand and balance the market this year. However, we maintain that Chinese end-use demand remains healthy, that consumers have been eager to step into the market on price dips and that the market will most likely remain in a meaningful deficit over the course of the year – all suggesting that prices are unlikely to fall significantly below the recent range on any sustainable basis.

Price spike likely deferred, but not avoided

We are pushing out our $11,000/mt target to 2Q2012 and lowering our 2011 year-end copper price target to $9,800/mt from $11,000/mt. Accordingly, we recently closed our long December 2011 copper trade recommendation – first opened on October 4, 2010 – for a gain of $1,872/mt (see Commodities Update: Target in sight, closing CCCP trade, April 11). We are also raising our 3-month forecast to $9,300/mt, and 6-month forecast to $9,600/mt.

Full report


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NOTW777's picture

can we place orders with GS?  I need some $9 silver

Thomas's picture

Bernanke is, once again, getting bullied on the playground. You got Goldman declaring using not-so-subtle code that we are headed for deflation/recession. You got Bill Gross having stated that he is taking his ball--the best ball--and going home until Bennie gets with the program. You throw on top of that what looks like a bear raid on the commodity sector. Bennie is gonna be whimpering (bitchez).

mayhem_korner's picture

GS' drones sell off and flee to Treasuries - an illusory micro-flash that there really will be buyers if Fed stops the presses.  Tack on a modest dip at the pumps all's well for Ben to take a midsummer's nap, only to be awoken when the sheeple plead to restart the engines once the Dow breaks 10K.  GS knows the unending supply of $$$ trumps, so their creating buy opps...

nope-1004's picture

Incidentally, this means gold and silver are next. You have been warned.

No.  This means that QE3 is a given and so commodities need to be halted.

Nothing like giving a "warning" that the ponzi needs to print more fiat and QE forever, therefore supress commodities.  The Morgue is trying to claw back PM's and is failing miserably.  Benocide is now sicking Goldman on the market to see if they can suppress inflationary worries..  Who's next?

This white-collar charade is up.  I don't care what Goldman says, they're all a bunch of fiat pimps that rely on free taxpayer money to survive.  Fuck 'em. 

Pondmaster's picture

Double F... em . We are just being scammed again - G.S. propaganda machine . Why even quote the bastards ?

Bicycle Repairman's picture

Gold is being hit with the FED/Goldman deluxe extra double cheese cheeseberger.  This is their best shot.  So far, BFD.  BTFD.

chumbawamba's picture

Bullshit.  Always do the opposite of Goldman for the long term.  Copper is being driven by hyperinflation.  I may be too bold in my $10/lbs before the end of this summer call but it is going up, and it's because of the printing.

Supply meets Demand, neither like each other, failure ensues.

I am Chumbawamba.

mayhem_korner's picture

You runnin' a 3Xbear-Goldman fund?  I'd be interested in some puts...

disabledvet's picture

i can see this actually and but not for the reasons you give.  this has "Fukishima" written all over.  There's "copper everywhere" but due to the fact that Japan is in the midst of a NUCLEAR crisis "it sits" rather than comes to market.  That theory makes sense as similar to oil "copper is everywhere" and "should be nowhere given the lack of any recovery in housing" but instead "just sits in the government bank as a store of value" in an age when paper money is being repudiated.  The wild card is still "US equities" which should have been selling off for months given the beyond anemic "recovery" under Obama and the Republican resurgence.  The "killer" would be a raging bull market in US equities for a third year in a row--which is possible given the depth of the decline in 2008 and the two extraordinary events of Fukushima and Islamic world revolt happening simultaneously (which should keep the QE in place.)  But that makes US equities as a "shining star" with one HELL of dark side.  The "Black Hole Sun" of markets.

A Man without Qualities's picture

"Copper is being driven by hyperinflation."

I think this is too simplistic.  I think there is something driving copper that Westerners have a sense of but lack the full picture.  In China, bonded copper is being used as a financing mechanism, buyers pay with a letter of credit and then place the copper in a warehouse, and get funding against it.  Therefore, they are getting cash out of the deal, but are taking a risk on the price.  I think this explains why the official warehouse data is volatile and hard to read, as copper is "taken" out of warehouse, in order to indicate demand and support price, but in reality, it is just placed somewhere else (the physical material is not moving, just the paperwork).  The key risk is that a decline could lead to a panic selling (the other risk is a revaluation of the Yuan).

As for JP Morgan, I suspect they are holding on behalf of funds, as well as an ETF and they may well have a position as a proxy hedge for the silver position (but I believe this would be acting as an agent for the Fed)

I went heavily into copper miners in March 09, and made a very good return but finally exited my positions at the start of this year because when I read what the copper miners were saying about demand, it was different to the banks (who were much more bullish) and because I thought China slowdown would hit demand and because I am not convinced it is a great hedge against inflation (particularly stagflation).

I do not deny the long term importance of copper, and I think any investment portfolio needs to have more copper miners than gold (because they don't have the absurd P/E valuations), but this market is just acting funny and I think we are due for a correction, which could become 25% or more.  $10/lb is frankly nuts for a highly oxidizing and expensive to store metal...

chumbawamba's picture

Yeah, you say all that, until it hits $10/lbs because of money printing.

This is hyperinflation.  You said it yourself:

"In China, bonded copper is being used as a financing mechanism, buyers pay with a letter of credit and then place the copper in a warehouse, and get funding against it."

That's called "money".

I am Chumbawamba.

markmotive's picture

And then you have the whole supply issue with oil...but according to Nicole Foss oil constraints will lead to a deflationary event.


I disagree. I think it will lead to deflationary pressures, but the act of combating those deflationary pressures will be highly inflationary.

A Man without Qualities's picture

It will be especially deflationary for suburban house prices...

American Dissident's picture

Market Maker is just creating buying oppritunities for...themselves.

SilverBaron's picture

Didn't we just read earlier that Goldman may be trying to weaken its largest rival JPM?  Isn't JPM holding a shitload of copper? 

I hope they both crash.

Hansel's picture

JPM is heavy in copper.  They tried to corner copper to hedge their PM shorts, in my opinion.

Pegasus Muse's picture

A dose of Richard Russell to help offset all mind games and PM negativity.


April 12, 2011

With gold and silver consolidating recent gains, the Godfather of newsletter writers Richard Russell had some interesting things to say in his latest commentary, “In all my years of investing, I have never seen an asset hit record highs, as gold has done recently, with less fanfare. There were no front page stories in the Wall Street Journal or Financial Times, heralding the new milestones." Fred Hickey, editor of the High-Tech Strategist and a member of Barron's Roundtable.”

After quoting Hickey, Russell continued:

“Gold is another story. The daily chart (above) shows gold breaking out of a head-and-shoulders bottom to the upside. Course of action -- sit with your precious metal position. Buy more on any pull-back toward the line of support (line of support is now at about 1450).

Russell comments on gold and silver -- Because the precious metals are in a massive bull market, many eager amateur analysts are now trying their hand on calling "the top." This is a hopeless and ridiculous endeavor during a powerful bull market. Much of this top-calling is done by an anti-gold element: Those who dislike gold or those who have missed the entire gold bull market. My advice all along has been to "ride the bull" and to ignore the "top callers."

The precious metals will correct when they are ready, and I might add that in ten years of closely following gold and silver, I have never come across anyone who has successfully called tops or who has successfully traded in-and-out of the metals. Advice -- stay invested in the metals until they exhaust themselves in panic buying.

Even then, what would you sell you gold for -- more fiat paper? We'll talk about selling precious metals when the time comes, which may be months or even years in the future.

 Last, we turn to the Dollar Index...The Index is perched precariously above the critical 75 level with MACD in the process of turning negative.

A much longer view of the Dollar Index....Major critical support comes in at 70.69. I would think anything below 70 might set off a dollar panic.”

Gold has broken out above the $1,450 area and as Russell says, generally you want to buy on pullbacks toward that level. The public might be too skittish to do that, but the professionals certainly will. If that level holds, it will provide the base for the next leg higher in gold. For the non-professionals, simply accumulate each month on the same day and dollar cost average your purchases over time. This is a huge secular bull market, enjoy the ride. As far as the US dollar goes, God help us when we finally break 70 on that index.

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

Eric King

ZapBranigan's picture

"The precious metals will correct when they are ready"

It is said that a picture is worth a thousand words...that statement is worth a thousand thoughts.

Thanks for sharing.

Pegasus Muse's picture

You're welcome.  An Oddball response to all those PM bashers out there:

slewie the pi-rat's picture

richard russell is very compelling.  there has been a topside breakout and 1450 in the new support.  here's the chart.  duh.

richard russell may be right.  hope he is. 

but, that 1450 hasn't been tested, til today.  yup!  it's doin fine, but it din't trampoline back up $20 when it hit it, either. 

the fact that richard russell wants you to buy, here, does not mean that 1450 is gonna hold for support.  the market will determine that.  maybe before NY opens tomorrow, maybe not for three weeks. 

r.r. like the probabilities of this holding, i'll betcha, or he wouldn't have come out so strongly.  would he?

Treeplanter's picture

Thanks, Peg.  It is what it is.  Friends ask when I will sell my PMs.  About the time they start buying, I'll start thinking about it.  

knukles's picture

War of the Worlds.  JP's bets open and vulnerable, the Squid circling for the Daily Double in the Lightning Round.

Trundle's picture

Both JPM and Goldman are Rothschild controlled institutions.  JPM and Goldman often work synchronously.  Healthy competition? Perhaps. 

Stares straight ahead's picture

This is my thought too.  Why tell the batter what pitch is coming?  GS is jawbonin' and gettin' a boner.

Pladizow's picture

Hopefully Goldman is right and we are all provided with an opportunity to BTFD!

Martin Armstrong writes that the best case for a sustained secular bull market in gold, is a low in June.

However, if the last ten years provides a guide, gold has found its low in 9 of the last 10 years by May and 6 of the last 10 years in the first quarter.

ZapBranigan's picture


Hey!  Just one darn second there buddy!  Didn't you hear?  Jim Cramer said, "the economy is on the mend" today.  So, the PM bull market is over, got it!?

LMAO!  Fuck 'BTFD'...Buy Before You Can't anymore. (BBYC)


Turd Ferguson's picture

These fucking criminal fuck bastards get nailed to the wall by Trader Dan. All should read:

slewie the pi-rat's picture

another awesome TD!  and he works with whooom?  lol!

bigelkhorn's picture

Why dont the people see it....they are just sheeple on GS email list. Do you think GS are going to do what they are doing....or you think they are trying to stay with their clients and work for them. Not effing way... brokers age old trick is to buy when their client base is silling and VISA VERSA. I am amazed no one really catches on to this!!!

I subscribe to the guy from australia and his FFT economic newsletter at  that guy has called many big events before they have happend, including the stock market crash in 2008 and the current financial collapse of the US. (currently happening) I found him from a friend last year, and he has some important work.

His oil calls are insane, and I have been making good money with them. He is well worth a look, if you want to keep two steps ahead of the sheeple out there.

mynhair's picture

Hey, GS, can you fill an Au order at $700?


tempo's picture

With a near 100% correlation between commodity and stock prices over the past 3 years, a sell position on spx is next. So everyone should be long 5 and 10 year bonds as the inflation threat is over so says GS. If only finding and producing copper, oil, wheat, corn, coal, etc. was as easy as writing a silly 4 page report.

Idiot Savant's picture

If only finding and producing copper, oil, wheat, corn, coal, etc. was as easy as writing a silly 4 page report.

+ I'm not impressed with GS' ability to move the market. Get back to me when they've moved commodities down by twenty percent.

The ball is squarely in Ben's court. It's all about QE3; to be, or not to be.

Thomas's picture

My old college room mate, one of GS's top dogs, used to laugh at those "silly little blue reports." 

Idiot Savant's picture

I assume this is a dig, care to expand?

NOTW777's picture

see - there is no inflation. GS just turned the knob down - all fixed

mynhair's picture

We would be better off if Stuart Varney went back to Britain where he belongs.

long juan silver's picture

We'd be happy if Carl Quintina washed his hair and described at least 2 things he knows about business.

Votewithabullet's picture

All he has to do is read the news and look good. Joe K. has a phd, wtf does he know? 

Shameful's picture

I can only hope. Getting a little rich on my paycheck, to bad the paycheck is not expanding as fast as the Fed's balance sheet.

In Fed We Trust's picture

Nothing like getting GS to to do the dirty work of .......


Paging Mr. Cramer.  Mr. Cramer....

Cdad's picture

Hooray!  Lloyd has his wood on.  And so in the morning we can continue with the plunging and screaming!  Lloyd be praised...

Dr. Porkchop's picture

God's work in action. Bring peace to your life and accept him into your heart as your personal Lloyd and banker.

Cash_is_Trash's picture

GS is pouring the cold water... Moving the fucking goalposts are we?

silvertrain's picture

On deck is a 1kbf lumber downgrade I guess....

Savonarola's picture

"Spike likely deferred but not avoided".

Your typical Wall St gibberish.

A graduate of the Henry Blodgett Institute, majoring in blowing smoke up everyone's ass, for money.

RobotTrader's picture

As stated earlier, TPTB has complete control of our markets.

Jawboning and paper shorting can move any commodity market at will, up or down.

Short tickets for NYMEX and COMEX can be printed into infinity.

You cannot print end users of copper, oil, gold, silver.

LOL....I bet nobody thought of that.....

Spalding_Smailes's picture

Mr. " Two Face " is expanding after he said he would never post on ZH and shut down the blog if he was wrong ... Lol

But he just steals Santa's info anyway, Atlas Shrugged ...


So, here's my promise to you. Gold will trade at $1600 on or before 6/10/11. If I'm wrong, I'm shutting down this blog and going away, never to be heard from again as I will have proven myself to be of little value. If I'm right...well, let's just say it would be perfectly appropriate for you to hit the "Feed The Turd" button every day for the rest of your life.