Copper price dropped from its all-time high of $5.02 per pound in March 2022 to a 19-month low of $3.13 in July. While it has remained above the aforementioned low since then, it has been trading below the previously steady support level of $4.00 for six months. Into the coming year, global recession concerns, strength of the US dollar, and health of major economies such as China will remain at play. Even so, resilient demand is set to boost the red metal.
Analysts’ outlook for copper price in 2023
In late 2020, Goldman Sachs predicted a commodities supercycle that could last for several years. Even with the recession fears and bearish global economic outlook, the investment bank remains bullish on this class of assets.
Granted, it acknowledges that this factor is a probable bump on the commodities’ uptrend. However, it has further stipulated,
“our economists argue that global economic growth is set to rebound with China seeing the reopening happening today, Europe improving its energy efficiency in a one-off decline in industrial activity and a slowing of the aggressive Fed rate hikes in the US. These underpin our expectation that commodities (S&P GSCI TR) will return 43% in 2023”.
One of the commodities that Goldman Sachs is bullish about is copper. Recently, the investment bank adjusted its 12-month forecast for the red metal from $9,000 per tonne to $11,000 per tonne. At the same time, it adjusted its forecast for the red metal’s average price to $9,750 per tonne and $12,000 per tonne in 2023 and 2024 respectively.
Similarly, the Bank of America forecasts a surge in copper price to $12,000 per tonne in Q2’23. However, for the rallying to occur, analysts at the bank has placed steady demand and the easing of Fed’s aggressive monetary policy as the required factors.
Factors at play
In coming months, the focus will be on how the market performs amid resilient demand and headwinds related to the health of the global economy. With regards to the latter, further easing of COVID-19 restrictions in China will remain a key driver for the remainder of 2022 and the initial months of 2023. Besides, investors will be keen on the Fed’s position regarding its monetary policy and the probability of a global recession.
Even with these headwinds, copper price will likely continue to find support from the energy transitions. Indeed, the red metal is at the core of major economies focus’ on transitioning to renewable energy. This is based on its vast uses in industrial, electrical, and construction sectors.
